Railways

Lord Bradshaw: asked Her Majesty's Government:
	When they expect improvements in reliability and punctuality on the railways.

Lord Filkin: My Lords, the Government agree that rail passengers are experiencing far too many delays. Early and significant improvements are required. The rail strategic plan published on 14th February by the Strategic Rail Authority sets out short- and medium-term action to improve performance, as well as setting out the longer-term vision for Britain's railways. We welcome the steps that the SRA, under the chairmanship of Richard Bowker, is taking to improve performance across the industry.

Lord Bradshaw: My Lords, I thank the Minister for that reply. Today, we are experiencing yet another industrial dispute on South West Trains and there have been disputes in Leeds and in Scotland. Will the Minister consider amending industrial relations law so that an aggrieved party—that is, a commuter—may test in the courts whether a company or a trade union is behaving reasonably? Industrial relations law recognises only an employee and an employer. It does not recognise the position of commuters, who are suffering damage estimated at £20 million a day.

Lord Filkin: My Lords, I welcome the opportunity to re-emphasise the Government's view. In this day and age, disagreements over pay should not give rise to strikes, especially in vital public services. As the noble Lord says, the present strikes are causing great inconvenience to the travelling public and are doing nothing for the recovery of the railway industry. However, it is not for the Government to intervene directly and become a party to negotiations. We shall be active in expressing the anger and frustration of the travelling public, both to management and to unions, and calling on them to resolve the issue through negotiations and not through further strike action. We believe that both the operator and the trade union side should get back round the table as soon as possible to resolve any outstanding disputes.
	I noted the noble Lord's interesting question about whether unreasonable behaviour could be made actionable. I do not wish to dispute the suggestion out of hand, but my initial reaction is that it would certainly generate substantial employment for my learned friends.

Lord Renton of Mount Harry: My Lords, the Secretary of State for Transport, Mr Byers, has reasonably said that if railway standards are not substantially improved he will fall on his sword. By what five economic tests is he to be judged?

Lord Filkin: My Lords, my response is: "Wait on". Clearly, without being naive, the Government would want to set out very clearly what we expect to achieve. To some extent, this House has already seen that. The Strategic Rail Authority's plan has been published and was discussed in this House. For the first time for 50 years, it sets out a plan for a major expansion in the railway industry. However, I do not believe that my right honourable friend in another place will have to fall on his sword. The Government believe that the plan will deliver substantial improvements over the life of the plan, and that we shall begin to see some of those improvements by the time of the next general election. There are four reasons. The first is the massive commitment of the Government to do so. Secondly, we have trebled investment per annum compared to that during the last years of the previous government. Thirdly, there is a realistic plan to implement the strategy. Fourthly, there is strong leadership, through Richard Bowker, to take the plan into practice.

Lord Faulkner of Worcester: My Lords, does my noble friend recall that one of the unspoken purposes behind the privatisation of the railway and breaking it up into many parts was to break the power of the public sector trade unions in that industry? Does he accept that the effect of privatisation has been exactly the reverse? As the noble Lord, Lord Bradshaw, said, immediate industrial disputes are threatened in three companies, and over the next few weeks strike ballots will be held in regard to a further two. Is it not the case that companies are having to bid against each other, and the trade unions are realising that when that happens they are put in an incredibly powerful position? Is not the way out of this situation a return to a system of centralised bargaining and centralised negotiation?

Lord Filkin: My Lords, there is widespread recognition, both in this House and outside, that we need a much better way of resolving industrial relations issues in the railway industry. That is particularly so in regard to industrial action, when one of the main sufferers is not simply the employer but the general public, on the scale that we have seen. Such matters are for the companies and the trade unions to resolve, and we welcome positive suggestions. However, all systems of pay negotiation have their disadvantages as well as their advantages. It is not absolutely clear that full national pay bargaining is necessarily the way to go—but neither is the status quo.

Viscount Astor: My Lords, where is government policy coming from on this matter? Is it coming from the Strategic Rail Authority, from the Department for Transport, or from a department in the Treasury which is conducting a review? Or is it coming from the No. 10 Forward Strategy Unit, which I understand is now looking into transport policy? Or is it coming from the noble Lord, Lord Birt? From whom is the Minister receiving his briefing? When asked by the Select Committee about the role of the noble Lord, Lord Birt, the Secretary of State, Stephen Byers, said: "It keeps him occupied". Is the noble Lord aware that there are quite a few Members of this House, particularly on his side, who also need to be kept occupied occasionally? Can he tell them where they should apply for jobs?

Lord Filkin: My Lords, many of my noble friends would be extremely well qualified to apply for many jobs in both public and private sectors. As to the noble Viscount's question, apart from the bits that I make up myself as we go along I get my briefing from all parts of government, although I regret that I did not speak to the noble Lord, Lord Birt, in this case.

Lord Bridges: My Lords, should not the Government now invoke the assistance of the Advisory, Conciliation and Arbitration Service—ACAS—to which previous Labour Governments have always paid great attention?

Lord Filkin: My Lords, I am reluctant to give advice in the middle of an industrial dispute. I understand that South West Trains has indicated its willingness to go to arbitration provided it is binding, but I gather that RMT will not accept binding arbitration. If I am wrong on that, I shall write to the noble Lord.

Lord Eden of Winton: My Lords, is it not clear that the dispute is much more about union power than about union pay, no matter how much inconvenience may be caused to the public or how much embarrassment may be caused to the Government?

Lord Filkin: My Lords, in my experience industrial disputes are usually a complex of a whole variety of reasons. I read the papers as much as the noble Lord does and I have seen that allegation made about issues within RMT. However, it would not be helpful for me to speculate publicly about such issues from the Dispatch Box.

Decontamination of Surgical Instruments

Baroness Knight of Collingtree: asked Her Majesty's Government:
	Whether they will now publish the conclusions of the review of the decontamination of surgical instruments in the National Health Service, as promised by the Lord Hunt of Kings Heath on 11th December 2001 (HL Deb, col. 1231).

Lord Hunt of Kings Heath: My Lords, the review of decontamination of surgical instruments in the NHS in England was published on 11th December 2001. Copies of the report were placed in the Library of the House and it is available on the department's website. All NHS hospitals in England have access to decontamination services of an acceptable standard.

Baroness Knight of Collingtree: My Lords, does the Minister recall that my Question on 11th December referred to a report that was suppressed because the Government disliked its findings? He said in his Answer that he was publishing the report that day. Is he aware that I asked the Printed Paper Office for it on that day, on the following day, on the following week and on a number of occasions since, but only late this morning, after exhaustive research by the excellent staff in that office, was it found on an obscure Internet site? Is he aware that neither of the two reports on the subject—only intermittently on the Internet—has an international standard book number and thus cannot be classified as publications? Is the Minister not aware of the importance of keeping a promise made from that Box in this House?

Lord Hunt of Kings Heath: My Lords, I repeat what I said in my Answer. Copies of the report were placed in the Library of the House. The snapshot survey appears as an appendix to the survey report. In terms of the wider publication of the report, my understanding is that 1,000 copies have been distributed to the NHS. The picture tells a good story, which is that the problem of decontamination was considered, reviewed and dealt with.

Baroness Northover: My Lords, is the Minister aware that last year scientists at St Mary's Hospital Paddington estimated that half of all instruments used for tonsillectomies could be contaminated with new variant CJD? Is he therefore confident in the Department of Health's decision to abandon the use of single-use instruments because of increased morbidity and mortality associated with them? Does he feel that that is fully justified? How does he expect parents to make informed decisions for their children about whether to ask for single-use or multi-use instruments when he fails to make fully public reports such as the one just mentioned by the noble Baroness?

Lord Hunt of Kings Heath: My Lords, the noble Baroness is wrong, because the full results were made available on 11th December. As far as the question of single-use instruments is concerned, the point that arose from that is that the Medical Devices Agency investigated a number of problems in relation to some tonsillectomy operations. Those investigations identified one of the likely causes of the problem as due to one piece of equipment used in the operation. That is why advice was issued to the health service around single-use instruments. Of course the department's role is to ensure that such advice is promulgated throughout the health service as quickly as possible. That is what happened in this case.

Baroness Noakes: My Lords, in his reply to my noble friend's Question last December, the Minister said:
	"the snapshot survey to which the noble Baroness referred is being published alongside the full survey that the Government are publishing today".—[Official Report, 11/12/01; col. 1232.]
	Is he also aware that, despite several searches of the Department of Health's website yesterday, using "decontamination of surgical instruments" and similar useful words, I could find no trace of that survey? Will the Minister tell us the meaning of "published" or "published alongside" in this new world of spin?

Lord Hunt of Kings Heath: My Lords, I have already stated that the report, including the snapshot survey, was placed in the Library. My understanding—and I have checked with my officials this morning—is that the snapshot survey is part of the documentation which is available on the website. If the noble Baroness had contacted me at any time since 11th December to say that she was having difficulty finding the report, I would have ensured that she received it forthwith.

Baroness Gardner of Parkes: My Lords, is the Minister aware that it is often quite difficult to get publications of any sort that are put out by the Department of Health through the Printed Paper Office? The PPO says that those publications do not come there automatically and have to be specially requested.

Lord Hunt of Kings Heath: My Lords, I made it clear that this would be available in the Library of the House. It seems to me that that is a perfectly appropriate way in which information can be obtained.

Baroness Knight of Collingtree: My Lords, the report was not available in the Library. I went immediately not only to the Printed Paper Office, but to the Library and asked for it.

Lord Hunt of Kings Heath: My Lords, I am assured that a copy of the report was placed in the Library. I also say again to the noble Baroness that if she had contacted me at any time since 11th December, I would have ensured that she received a personal copy of the report. The information on the website contains 18 documents. It also provides access to a further 18. I would be delighted to ensure that the noble Baroness receives all 36 reports.

Lord Trefgarne: My Lords, is the Minister—

Baroness Platt of Writtle: My Lords, perhaps I may—

Baroness Northover: My Lords, is the noble Lord—

Lord Williams of Mostyn: My Lords, I think that it is fairer for noble Lords who have not had an opportunity to go first.

Baroness Platt of Writtle: My Lords, the Minister has said a lot about reports, but are the instruments being decontaminated in the hospitals? Surely that is the most important thing of all.

Lord Hunt of Kings Heath: My Lords, I could not agree more with the noble Baroness. The results of the survey, which were indeed made available on 11th December, show that no decontamination facility in the NHS was considered unsafe. We have a complete programme of action which has been going for more than two years to improve decontamination facilities. There is clearly no room for complacency, but a great improvement has now taken place.

Lord Trefgarne: My Lords—

Noble Lords: Next Question!

Lord Williams of Mostyn: My Lords, I think that we ought to move on because there is a very important Question.

House of Lords Reform

Lord Campbell-Savours: asked Her Majesty's Government:
	Whether the comments of the Lord Chancellor in the debate on House of Lords reform on 9th January about the interim nature of the Government's proposals on composition are consistent with the White Paper's title The House of Lords: Completing the Reform.

Lord Irvine of Lairg: My Lords, the White Paper was called Completing the Reform following the language of the Labour manifesto of 2001. Your Lordships will recall that, in our previous debates, the removal of the rights of the hereditaries had been described as phase one and that phase two would follow. In our debate on 9th January, I was seeking to explain that the White Paper proposed a phase two which would constitute completion of the reform for the present. I added that, after a period of years, it would no doubt be correct to revisit the composition issue, so that what we were proposing was,
	"a compromise for today, not a solution for all time".—[Official Report, 09/01/02; col. 565.]
	Although 120 elected is the maximum possible at present if the rights of the existing 587 life Peers are to be respected, I was indicating that there could be greater flexibility over time. History never ends.

Lord Campbell-Savours: My Lords, in light of the very convincing evidence that my noble and learned friend gave last week to the Public Administration Committee in another place, is it not fair to say now on reflection that the White Paper title—Completing the Reform—was inappropriate and perhaps even unfortunate?

Lord Irvine of Lairg: My Lords, from the reception of the White Paper, I am ready to agree that many people seem to have been misled by the title. As I said, however, we were signalling completing phase one and phase two for now, with the maximum number of elected being consistent with respecting the right of the existing life Peers. If revisiting the issue at some stage were to be called stage three by others, I would not be uncomfortable with such a description.

Lord Barnett: My Lords, does my noble and learned friend accept that the phasing of any reform—such as that proposed by the Leader of the Opposition, with the support of a few Conservative Peers, that 80 per cent of 300 Members be elected; regardless of the actual number and way in which it is arrived at—would count as the last stage of reform?

Lord Irvine of Lairg: My Lords, it is a very far remove from any of our thinking on this subject that 80 per cent of the Members of this House should ever be elected. We believe that the pre-eminence of the House of Commons is essential to the stability that lies at the bedrock of our constitution. As your Lordships know perfectly well, and as your Lordships' two-day debate showed, the problem is that, on the issue of House of Lords reform, there are as many opinions as there are politicians to express them. So, yes, there is as yet no consensus around the White Paper proposals, but nor is there any consensus around any other set of proposals. I believe that the proposals of the Leader of the Opposition in the other place, to which reference has been made, would attract near unanimous rejection on the Conservative Benches in this House—that is, if the noble Lord, Lord Strathclyde, were to hold a free vote on them.

Lord Renton: My Lords, as your Lordships' principal task is to invite the government of the day and the House of Commons to think again, would it not diminish the value of your Lordships' House if we found that, owing to excessive democratisation, we had a majority here that coincided with the majority in the other place?

Lord Irvine of Lairg: My Lords, as I said, the bedrock of stability in our constitution is that the elected Chamber is pre-eminent, and is ultimately entitled to have its way when there is conflict with this House. It must be remembered that the conventions underpinning that are premised on this House being unelected and the other place elected. It really is not real-world politics to deny that, if the proportion of elected in this House became substantial, the dynamics of the relationship between both Houses would fundamentally change. It could even be argued that a substantially elected House of Lords had a superior legitimacy, on the basis that there are some who think that PR is more legitimate than first past the post. I emphasise, however, that the Government proposed 120 elected not on the basis that it would give this House greater legitimacy, but as a means of ensuring representation in this House of the nations and the regions.

Lord Goodhart: My Lords, does the noble and learned Lord accept that reform of the upper House cannot be complete until we have considered the functions and powers as well as the composition of that House? Does he agree that the White Paper contains nothing of any significance whatever on that subject?

Lord Irvine of Lairg: My Lords, we can of course talk about the parliamentary aspects of reform. However, I believe that most Members of this House believe that, broadly speaking, the functions and powers of this House are correct. They operate as a check and a balance on the House of Commons. In my own view, the starting point of any consideration of the issue is not some type of bidding process about how many elected there should be, but an examination of the purpose of this House, having regard to its powers and functions. We should then ask ourselves what that tells us about the composition issue.

Lord Strathclyde: My Lords, the noble and learned Lord has announced that there is to be a third stage of reform of this House. He has also said that the Labour Party will have a free vote, and that there are no politicians who can agree on this subject. Is not the greatest place of disagreement at the heart of the Government themselves, in the Cabinet, with a fundamental disagreement between the noble and learned Lord and the leader of another place, Mr Robin Cook? Therefore, is not the best possible way of seeking to resolve these differences between parties and within parties to establish with some haste a Joint Committee of both Houses to examine those issues?

Lord Irvine of Lairg: My Lords, I fear that the noble Lord misheard me: no suggestion has come from me about a free vote, other than to invite him to conduct a free vote among his own Benches to confirm what we all know very well—the Leader of the Opposition's proposals in another place go down like a lead balloon on his own Benches. I have not announced that there will be a stage three; what I have said is that we shall be well able in time to revisit the issue of the number of elected Peers while at the same time protecting the pre-eminence of the House of Commons. If others—not the Government—were to call that stage three, that is a matter about which I am relaxed.

Afghanistan: British Detainees

Lord Hylton: asked Her Majesty's Government:
	What steps they are taking to ensure that the International Committee of the Red Cross or British consular officials have access to all British citizens and others entitled to British protection who have been arrested in Afghanistan, whether they are held in that country or transferred elsewhere.

Baroness Symons of Vernham Dean: My Lords, British officials have had access to three British detainees held by the United States authorities at Guantanamo Bay. The International Committee of the Red Cross now has a permanent presence at Guantanamo Bay and ICRC officials have access to the detainees held there at any time. They also have access to detainees in Afghanistan. I further understand that a British official has also seen one British detainee in Afghanistan.

Lord Hylton: My Lords, I thank the Minister for her reply. Can she say how many British persons are now held in Afghanistan and whether any of them are held in very bad conditions at Mazar-i Sharif? Can she also confirm that there will be no indefinite detention—that is to say, no hostage holding—and, finally, that those who may be charged with offences will be tried before British courts?

Baroness Symons of Vernham Dean: My Lords, we know of only two British detainees in Afghanistan. As I mentioned, one has been seen by an official. But there may, of course, be others of whom we are unaware at the moment. We shall continue to make inquiries to try to find out whether there are further British detainees held in Afghanistan. There is no evidence that the United States, or any other detaining authority, is trying to hold detainees indefinitely. Most detainees have been in custody for only a few weeks and, of course, the crucial issue is that their status has not as yet been determined. The noble Lord also asked about the issue of where a trial should be held. We should be happy for trials to be held in this country if—I stress the word "if"—that were the most effective way of pursuing a prosecution and if the United States authorities were happy to proceed on that basis.

Lord Avebury: My Lords, what right does the United States have to detain British citizens even for a matter of weeks on the territory of a third party state? Is not the best course of action, if it is said that these men have committed criminal offences, for the United Kingdom to request the US authorities to deliver the men up to us so that they can be tried in British courts?

Baroness Symons of Vernham Dean: My Lords, this really does beg difficult and, if I may say so, highly complex legal questions about the status of the detainees in the first place. The noble Lord will know that there has been a great deal of speculation in our own press and in the United States about the status of the detainees. The United States as the detaining authority still has not made a decision on that issue. I believe that I have made the British Government's position clear on the question of possible trials in Britain, but I repeat that we should be happy to do that if it were a sensible and effective way of pursuing justice and, of course, if that were something to which the United States as the detaining authority was able to agree.

Lord Acton: My Lords, can my noble friend say—

Lord Howell of Guildford: My Lords, I think that it is the turn of this side.

Lord Acton: My Lords, is it?

Lord Howell of Guildford: My Lords, yes, it is. The noble Lord can speak in a minute. There is plenty of time.
	Is it not correct that the Foreign and Commonwealth Secretary has in fact called for the return to Britain of all British citizens arrested by the Americans and others in Afghanistan? On what grounds is he doing that? Would it not be wiser to focus just on those individuals against whom there are specific British charges or specific British evidence and for them to be returned to Britain and for the rest, who may well have committed terrible crimes against Americans or others, to be investigated and tried appropriately in the United States?

Baroness Symons of Vernham Dean: My Lords, I am afraid that the noble Lord is not quite correct to say that my right honourable friend has called for the return of British detainees to the United Kingdom. I think that the noble Lord may refer to something which I also heard on Radio 4 last week. However, I make clear to the noble Lord that what matters is where the prosecuting authorities would have an effective chance of pursuing justice—that has to be determined—and, of course, as these are almost unprecedented cases, we would wish to proceed on a basis that could be agreed with the United States.
	Of course, these issues are being raised between Ministers. I have raised them myself with officials from the American Embassy in London and my right honourable friend will pursue these issues with Secretary of State Powell when he visits Washington again on Thursday. I agree with the noble Lord that these are potentially horrendous crimes. However, we must not judge what has happened. People must have a fair trial. That is absolutely fundamental to the points that are worrying the noble Lord, Lord Hylton. If I may say so, the real issues here are that there should be humane treatment, whatever the status of these individuals, and, that if they face trial, such a trial should be a fair one.

Business

Lord Carter: My Lords, at a convenient moment after 4.30 p.m. my noble friend Lord Whitty will, with the leave of the House, repeat as a Statement an Answer to a Private Notice Question which is being asked in another place on the report of the Commission on the Future of Farming and Food.

Civil Defence (Grant) Bill

Brought from the Commons; read a first time, and to be printed.

State Pension Credit Bill [HL]

Baroness Hollis of Heigham: My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
	Moved, That the House do now again resolve itself into Committee.—(Baroness Hollis of Heigham.)

On Question, Motion agreed to.
	House in Committee accordingly.
	[The CHAIRMAN OF COMMITTEES in the Chair.]
	Clause 4 [Exclusions]:

Lord Tordoff: I should say that if Amendment No. 48 is agreed to, I shall not be able to call Amendment No. 49 due to pre-emption.

Baroness Noakes: moved Amendment No. 48:
	Page 3, line 36, leave out subsection (1) and insert—
	"(1) Only one member of a married or unmarried couple shall be entitled to state pension credit.
	(1A) Where both members meet the conditions—
	(a) they shall elect jointly which member shall receive the credit, or
	(b) if they are unable to agree, the member with the lower income shall receive the credit."

Baroness Noakes: I hope that this amendment is self-explanatory. It builds on, though re-expresses, the concept in the Bill that for a married or an unmarried couple there is only one set of entitlement to state pension credit. But, importantly, it deals with who should receive that credit. The amendment proposes that in the first instance the couple should agree which of them should receive the credit, but that if they do not agree it should be paid to the person with the lower income. In practice that may mean that the credit would mainly be paid to wives or the female part of a couple as they are likely to have the lower income. But, of course, the amendment is not designed to favour the female over the male and where the male has the lower income he should receive the credit. I beg to move.

Baroness Barker: I wish to speak to Amendment No. 49, which is grouped with Amendment No. 48. It concerns a slightly different subject and it is, in the nature of these things, a probing amendment. It deals with the question of separation. The purpose behind the amendment is to seek information from the Minister about the circumstances in which a couple separate and are determined to have separated. We know from our deliberations the other day that a couple comprises a household unit of a man and woman living together as a couple.
	The amendment's wording is taken from the WFTC Bill. I seek to establish what will happen to the less-well-off member in a couple. I accept the relevant point made by the noble Baroness, Lady Noakes, that the man may be the lower earner. I seek to establish that in the complex workings of this Bill no pensioner will be left for a significant amount of time with less income than they would need simply through ceasing to live with the person with whom they were living when the calculation was made.

Baroness Hollis of Heigham: Amendments Nos. 48 and 49 concern issues affecting couples. We have touched on some of those issues previously in Committee.
	Amendment No. 48 considers how disagreements will be settled in cases where neither member can agree who should make the claim. Amendment No. 49 considers the meaning of "married" and "unmarried" couples in terms of pension credit. The argument of the noble Baroness, Lady Barker, was slightly different from the wording of Amendment No. 49, but I shall try to deal with her point. With the Committee's permission I shall deal with each amendment in turn.
	Amendment No. 48 seems to do two things. First, it provides an alternative form of drafting to the current provisions in Clause 4(1) of the Bill, which ensures that only one member of a couple shall be entitled to pension credit. Secondly, the substantive part of the amendment seeks to specify in primary legislation the criteria to be followed in situations in which neither member of a couple can agree on who should make the claim. I believe that the approach we have adopted in the Bill is correct.
	I start by pointing out that such cases are extremely rare. I have checked with officials who have worked in this area for more than 20 years and none has ever come across such a case. We are dealing with hypotheticals. That is not to say that there have not been cases, but on a quick check those officials had not come across any. In relation to the minimum income guarantee, such disputes, where they exist—hypothetically or otherwise—are settled by the Secretary of State, who is in effect the local decision maker, taking into account the individual circumstances of the case. Standing instructions say that in the first instance the responsibility for settling the dispute would be returned to the couple. As one would expect, the couple would be given every opportunity to resolve the problem themselves. For example, there may have been a mistake in filling in the forms.
	Where a customer indicates on the claim form that their partner does not agree to their making the claim, a letter is sent to both members asking them to decide who should make the claim. Only where it is clear that they are unable to resolve the dispute or no reply to the letter has been received after 14 days would further steps be taken.
	When deciding such a case, consideration would be given to a range of factors—for example, to who is normally responsible for paying the household bills. I do not believe that the noble Baroness's amendment would leave sufficient flexibility to allow the decision-maker to take account of the full range of sensitive issues that might arise in an individual case. That might involve asking detailed questions about the claimant's and the partner's incomes. For example, where income was derived from a joint bank account, it would mean making possibly arbitrary decisions on the apportionment of that income between the two partners.
	We know from earlier discussions in your Lordships' House on the minimum income guarantee that customers may be reluctant to claim benefits that require excessive investigations into their financial circumstances. We seek to move away from such an approach. Given that we are dealing, so far as I can tell, with a hypothetical case, we shall lay down guidance but we hope that it will not need to be used. That will give sufficient flexibility to deal with the matter in a decent and sensitive way. I hope that the noble Baroness, Lady Noakes, will withdraw her amendment.
	Amendment No. 49 is, as I would expect, a thoughtful amendment. We thought that we understood why the noble Baroness, Lady Barker, had tabled it but now I do not think that we did. It is still probably a thoughtful amendment but it involves a different thought for the day from that which we had anticipated.
	For the purposes of the clause, the amendment would align the way a "married" or "unmarried" couple is defined in pension credit and make that more in line with the meaning for tax credits. If the noble Baroness wishes, I could explain why we chose one system rather than another. Basically, she was interested—perfectly rightly—in what counts as separation. For these purposes, a married couple are married to each other and are neither separated under a court order nor separated in circumstances in which the separation is likely to be permanent. In such cases, they would be treated as two single people. For the purposes of housing benefit, they would have different accommodation.
	We have a choice in this regard about aligning the different definitions of a couple to either the social security system or the system for tax credits. We have gone for the social security system because, as Members of the Committee will appreciate, 1.7 million people will be transferring from the minimum income guarantee to pension credit, whereas only about 60,000 or 70,000 are simultaneously eligible for tax credits and pension credit. It makes better sense for us to follow the old DSS vocabularies, which are well established in law, and not to try to change all the legislation that feeds into that and then go for the tax system.
	I have pressed my officials on this matter. I said, "Tell me in practical terms what the difference between the two definitions is. Can you put a piece of paper between them?" They said, "No, you cannot". The implications of preceding legislation suggest that it would be simpler to keep to the somewhat different definitions. In the light of that, I hope that the noble Baroness will feel able to withdraw the amendment.

Baroness Noakes: I thank the Minister for that detailed explanation of the way in which these issues are handled in practice. My solution was perhaps much simpler and would save her officials having to ask all of those questions and make detailed decisions if there was a statutory rule. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 49 not moved.]

Lord Higgins: moved Amendment No. 50:
	Page 3, line 44, leave out "not"

Lord Higgins: In moving this amendment, I shall speak also to Amendments Nos. 51 and 52.
	The purpose is fairly clear but I am not absolutely certain about how the Bill's provisions will operate. Effectively, the provisions are concerned with various exclusions from benefit. Clause 4(3) is apparently concerned with the situation in which the amount of money that can be payable to a claimant would be very small. It refers to the amount being,
	"less than a prescribed amount",
	and operating in "prescribed circumstances".
	It is not clear where the power to prescribe amounts and circumstances arises in the Bill. Initially, I thought it arose in Clause 3(8), which states:
	"Regulations may prescribe descriptions of persons in whose case the maximum savings credit shall be taken to be nil".
	However, on reflection, it appears that Clause 4(3) is concerned not with the description of a person but with the description of an amount. That led me to the conclusion that the regulatory powers are not located in Clause 3(8).
	Since we are at the beginning of our proceedings today, I return to the question of regulations generally. The Minister generously said at Second Reading that she hoped that draft regulations would be provided by the time the Bill reached its Committee stage. We understand why that was not possible but perhaps she will let us know whether they are likely to be available in time for the Bill's Report stage. So much is done through regulations in the Bill that, without seeing those regulations, it is extremely difficult to make any sensible comment on large chunks of the legislation.
	So much for the procedural side of things. I turn to the substance of the amendment. As I said, it appears that the purpose of subsection (3) is to ensure that the claimant gets nothing in prescribed circumstances if the amount is below a certain figure. We understand that for convenience it may be inappropriate to pay out a small amount from week to week or month to month, but that appeared to us to be unfair, even in those circumstances. I gather that in that regard I have the support of the noble Baroness, Lady Turner of Camden. Our proposal is that the payment should be made at the beginning or end of the year, whatever the amount might be. The payment should be made as an annual lump sum.
	That is not a complicated concept. It is about the simplest amendment that we have debated in our entire proceedings so far and it is probably the simplest amendment that we shall consider. I hope that we shall receive a sympathetic reply from the Minister, who has conceded absolutely nothing so far. Here is a real opportunity to say, "Yes, we shall pay the amount annually". I beg to move.

Baroness Turner of Camden: I have tabled Amendment No. 51, which is grouped with the amendments in the name of the noble Lord, Lord Higgins. As the noble Lord rightly said, Clause 4(3) provides that amounts of pension credit below a prescribed level will not be payable. I believe that the sum of 10p a week has been mentioned. The amendment seeks to make the credit payable annually; for example, 52 weeks at, say, 9p would amount to £4.68. Since entitlement to the credit will normally change only annually, such annual payments should cause no administrative difficulty. After all, £4.68 is £4.68. If people are owed a sum of money, why should they not have it paid annually, as suggested in the amendments under discussion?

Baroness Hollis of Heigham: I believe that Amendments Nos. 50 and 52, when considered together, propose a change to the meaning of Clause 4(3). Amendment No. 51 has the same effect as Amendments Nos. 50 and 52. Therefore, I propose to address these amendments at the same time.
	Clause 4(3) provides that pension credit will not be payable if entitlement is under a prescribed amount. The intention here is not to pay pension credit if entitlement is under 10p a week unless payment of pension credit can be combined with payment of another benefit. In fact, this rule will affect very few people—probably no more than 500, even if there were to be a 100 per cent take-up of pension credit—as we anticipate that in the vast majority of cases we shall be able to combine payment of pension credit with another benefit.
	The noble Lord asks why we have not conceded anything so far. I am deeply mortified as I gathered that all his previous amendments were probing amendments. I understood that the intention of probing amendments was not to push for concessions but to explore the Government's thinking on the matter. If he does not consider that I have made our thinking sufficiently clear, I shall of course be prepared to speak at even greater length. But I believe that, on reflection, he may wish to consider his remarks further.
	There will be a small number of remaining cases—possibly 500 or so—where no other such benefit is in payment. Even though pension credit would not be paid in such cases, there is an underlying entitlement—this is the substantive point which has not been mentioned by Members of the Committee—which means that, for example, the claimant would be passported on to benefits, such as housing benefit, in the normal manner, even with a trigger of an amount such as 10p.
	That is a well-established rule and we consider it right to include it in relation to pension credit. If the amendments were accepted, it would mean potentially paying tiny amounts of pension credit—perhaps a matter of pence—at yearly intervals. It has always been a pragmatic decision whether to make such payments. But under this amendment the payment of 52p a year would be a possibility, and it is likely that that would be criticised by claimants as derisory.
	Members of the Committee may also be persuaded by the fact that, if the amendment were accepted, we would be paying out less than £2,000 a year in pension credit at an administrative cost of well over £4,000 a year, as our computer systems do not support annual payments. It cannot be right to spend £4,000 in paying out £2,000 when the sum in question is only 52p a year. That amounts to two postage stamps.
	By prescribing in regulations the precise rules which will apply to such cases, the Secretary of State will have the flexibility to adjust the circumstances in line with general changes in the methods of paying benefits. In other words, if the noble Lord is suggesting that in future it will make good sense to pay the credit as an annual lump sum, then, when we have the necessary computer power, that may be an appropriate way forward. As a result of my explanation, I hope that the noble Lord will feel able to withdraw the amendment.

Lord Higgins: We are grateful for that explanation from the Minister. She said that no problem arises with the de minimis arrangement if another benefit is payable. I am not clear whether or not that includes the other part of the state pension credit. Does "another benefit" include what used to be called "MIG"? If people receive MIG, will they receive this credit, even though it is a de minimis amount?
	The noble Baroness has not clarified the point that I raised regarding the regulations which enable these prescribed amounts to be made in prescribed circumstances. As I pointed out, at first I believed that the regulations were those under Clause 3(8), which comes immediately before the exclusions clause. However, that appears to apply to persons and not to amounts, whereas what is being prescribed here is an amount payable in certain circumstances. Therefore, I am still not clear which power enables the clause which we are discussing to be operated.

Baroness Hollis of Heigham: The power appears under Clause 4. By virtue of Clause 17, which defines terms under the Bill, "prescribed" means specified in regulations. That relates to the last point which the noble Lord has just raised.
	I now return to the wider point concerning regulations. In relation to draft regulations, I had hoped to be more helpful to Members of the Committee than they may consider me to have been. We produced an extended memorandum which sought to describe how those regulations would be used. Regulations will be developed over the next four months. As soon as I have anything which I consider to be more helpful to noble Lords than the document that I have already produced, I shall of course let them know.

Lord Higgins: We are very grateful for that. We fully understand that there is no immediate obligation on the Government to produce such regulations or, indeed, such descriptions of regulations. We always very much appreciate the way in which the noble Baroness handles these matters. However, I still have a problem in relation to the technical point. I cannot see which regulatory power enables Clause 3, which we are debating, to be implemented. If, indeed, it is the one under subsection (8), which appears before the exclusions clause, then, as I say for the third time, that concerns descriptions of persons and not amounts. What is being prescribed here is not persons but amounts. Therefore, I cannot find the regulatory power that will implement Clause 3. I am sorry to persist with this matter.

Baroness Hollis of Heigham: We are dealing with Clause 4. Is that the source of the problem?

Lord Higgins: I am sorry; I meant to say not Clause 3 but subsection (3) of Clause 4. Perhaps I may state again that at the bottom of page 3 of the Bill is subsection (3), which we are now debating. It states that amounts may be prescribed or be payable in prescribed circumstances. I am not clear where the powers are that enable the Government to prescribe the amounts and the circumstances.

Baroness Hollis of Heigham: I shall write to the noble Lord if I am misleading him. However, if he looks at Clause 4(3) and then at Clause 17 at line 45 on page 11 of the Bill, he will see that "prescribed" means,
	"specified in, or determined in accordance with regulations".
	Therefore, where the amount is less than the prescribed amount—that is, less than 10p—the amount payable by way of state pension credit will not be payable except in prescribed circumstances; for example, where it can be aligned with the payment of another benefit. I do not understand the problem.

Lord Higgins: Rather than delay the Committee further, I shall look at the references which the noble Baroness has given and, if need be, we can return to the matter on Report. With regard to the substance of the Bill, I am still not clear where we are with regard to whether or not the de minimis amount will be paid in relation to the other parts of the pension credit.

Baroness Hollis of Heigham: There is one pension credit which comes about as a result of the move from the guarantee to the savings. Therefore, we are dealing with only one sum. If, at the end of the day, a payment of less than 10p is due under the pension credit—whichever part of the pension credit it relates to—then, if it is aligned with another benefit, it will be paid. If it is not—we believe that only 500 or so people may be affected—then it seems to me inconceivable that someone for whom only the guarantee element comes into play will not also qualify for housing benefit or council tax benefit. Such a situation may apply to a few pensioners but in normal circumstances an alignment would take place. I suspect that that situation may occur when the amount tapers out at the very end.
	As I said, we are dealing with a very small number of people. If, at later stages, the arrangement appears to be more problematic, it can be revisited. We have no wish to deny anyone, but when in the past government departments have sent out cheques for 2p, 3p or 50p over the course of a year, we have usually been teased by the Front Benches opposite, and rightly so.

Lord Higgins: I promise not to tease the noble Baroness. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 51 and 52 not moved.]
	Clause 4 agreed to.
	Clause 5 [Income and capital of claimant, spouse etc]:
	On Question, Whether Clause 5 shall stand part of the Bill?

Baroness Turner of Camden: Clause 5 provides that where the claimant is a member of a married or unmarried couple, the income and capital of the other member of the couple shall, except in prescribed circumstances, be treated as income and capital of the claimant. I have some difficulty with this clause, which is why I have put down my name to oppose it. It must be remembered that this legislation extends means testing to a much wider population than hitherto; that is, if we take seriously, as I do, the Government's own predictions of the numbers likely to be eligible for pension credit—as much as 65 per cent of the future pensioner population.
	Many couples regard themselves as couples within the financial sense having joint accounts and sharing incomes and savings completely, but that is not always the case. Some people guard their financial independence jealously. That is now true of many women. In such circumstances the partner may not know of the income, capital and savings of the other partner and may never have known of them completely. How will the income of such a partner be ascertained? Will there be wholesale snooping? Will people be encouraged, or feel they are being encouraged, to be dishonest, concealing income and savings? Perhaps instead of bank notes there will be piles of euros concealed under floorboards.
	I know that it will be said that there are types of benefit for which this already applies. Income support is a case in point. But again I repeat that we are talking here about an extension of means testing to a far wider population. We are talking of people who hitherto had not ever thought that it would apply to them, perhaps people who now regard themselves as rather middle class and who have acquired a personal pension that over the years has not provided the pension that they thought it would eventually provide, so they are forced to look at pension credit as a way of getting enough to live on.
	I cannot think of a suitable way in which to amend the clause but I am still not happy about it. I am sure that the Government must have given some thought to how this is to be applied and enforced, and how to avoid deliberate dishonesty on the part of claimants and partners. Therefore, I would welcome the views of the Government on the points I have made.

Baroness Noakes: Perhaps I may add to the comments of the noble Baroness, Lady Turner, by returning to the topic of unmarried couples, which we debated on the first day of the Committee stage. Unmarried couples have few, if any, financial obligations to each other. They certainly do not have obligations to disclose their financial circumstances to each other. If they are treated as one unit for pension credit purposes, that would mean that the details of each part of a deemed unmarried couple would have to be disclosed to the other. It could not be guaranteed that privacy would remain for one because in aggregating two, it would be a relatively simple calculation for one to discover what the other had, even if the Pension Service was able to deal with them as two individuals and add up their incomes separately.
	I am not an expert on human rights but I wonder what consideration the Minister gave, when she signed the customary declaration on the Bill, to the possibility that parties to the unmarried couples were being deprived of their rights to privacy. I should be interested in her comments.

Baroness Hollis of Heigham: My noble friend Lady Turner has long experience in social security matters. She will know, and there is a simple two-line summary, that all income-related benefits are household based. If somebody wants to enjoy an entitlement to a household benefit, we in turn must have the information on that household income. We cannot apply disaggregated or segregated tax rules to a household assessment. My noble friend knows perfectly well that if we were to follow her point, that would mean the disaggregation of social security in the concept of households into a series of individuals. Therefore, a non-working spouse of a wealthy husband, for example, would be entitled, with a very modest income, to a full pension credit. It is precisely to avoid that situation that Clause 5 makes clear that we are dealing with a household. The household is entitled to claim the benefit, subject to the discussion we have just had about who should make the claim, and so forth.
	It will not come as a surprise to Members of the Committee that all income-related benefits—JSA, income support, housing benefit and council tax benefit—will all have been based on household income. It may be the case that an unmarried pensioner couple have come together as pensioners and this may be new to them. However, that would pre-suppose that neither of them has ever been in a relationship before in which they have enjoyed a household benefit. They have to make that choice. If they want to enjoy a household-based addition to their income, which is their entitlement, they have to give us the information on which to base it. That is the point of Clause 5. To receive pension credit, both members of the couple need to agree to the claim being made. Therefore, it is not unreasonable that both members of the couple should disclose the financial circumstances to each other. That is the basis of social security law.

Clause 5 agreed to.
	Clause 6 [Duty to specify assessed income period]:
	[Amendments Nos. 53 and 54 not moved.]
	Clause 6 agreed to.
	Clause 7 [Fixing of claimant's retirement provision for assessed income period]:

Baroness Noakes: moved Amendment No. 55:
	Page 5, line 6, leave out subsections (2) to (8) and insert—
	"(2) The amount of the claimant's entitlement to state pension credit shall be calculated by reference to—
	(a) the claimant's actual income for the year ending on the date of the relevant decision; or
	(b) where the circumstances of the claimant have changed, by reference to the estimated income of the claimant for the 12 months following the relevant decision.
	(3) Income shall be determined in accordance with section 15.
	(4) The circumstances of the claimant shall be treated as having changed if—
	(a) the claimant becomes a member of a married or unmarried couple;
	(b) the claimant ceases to be a member of a married or unmarried couple;
	(c) the claimant attains the age of 65;
	(d) in a case where the claimant is a member of a married or unmarried couple, the other member of the couple attains the age of 65; or
	(e) the income of the claimant for the 12 months after the date of the relevant decision is likely to be higher or lower than the income for the preceding 12 months by at least 10 per cent."

Baroness Noakes: In moving Amendment No. 55, we return to one of our themes on the Bill; that is, complexity. We have already discussed in Committee the different concepts of income that are used for the guarantee credit and the savings credit. We now come to the way that income is treated for the purposes of fixing pension credits for up to five years at a time.
	Clause 7 is, indeed, complex. It has a new concept of retirement provision, which appears to cover some but not all of the income sources listed in Clause 15, to which we shall come in due course. There is a power in subsection (4) to deem that income will increase or, in some cases, decrease, over the five-year period. There are powers in subsection (7) to treat as income something which is not.
	I wonder what pensioners would make of all that. At best they would be bemused and uncomprehending. At worst, I suspect they would be confused and possibly even frightened. Amendment No. 55 is designed to cut through that by basing pension credit decisions on pensioners' actual income immediately before the decision on pension credit or on the income for the next 12 months if there is a change in circumstances. A change of circumstances is defined as including the position where the income for the following year might vary by more than 10 per cent either way.
	Taking that simple concept of income, there would be no need for special provisions for calculating income or different concepts of income. There would be no deemed increases or decreases, just a single figure. I should say that we are not entirely convinced that a five-year settlement of pension credit is an equitable approach. It means that a pensioner who won the lottery or had a major inheritance would be entitled to continue claiming the pension credit until the end of the five-year period. We shall debate the period a little later.
	The point of the amendment is that if the Government believe that a five-year interval for settling pension credit is desirable and want to go down that route—I suspect in practical terms it may be the only way that is feasible administratively—they should do so in as simple a way as possible. I beg to move.

Lord Tordoff: I must inform the Committee that if Amendment No. 55 is agreed to, I cannot call Amendments Nos. 56 to 59A.

Baroness Hollis of Heigham: For the first time today, we are getting to the substance of the five-year period. Therefore, perhaps I may say a few words about the detail of the amendment, which is interesting and far reaching. However, again it pursues the issue of alignment with the tax system. As I understand it, it proposes to borrow from the system of five-year assessed income periods covered in Clauses 6 to 10 and the five-year assessed income period itself, but then to impose limits and new classifications.
	The five-year assessed income period and the processes that support it are a key feature of pension credit which will, I hope, reassure pensioners that this is a world away from the weekly means test they are currently experiencing. We would strongly resist all attempts to fetter the purpose of a five-year assessed period, so that pensioners know where they stand.
	In the future a pensioner approaching pensionable age will receive his or her invitation to claim state retirement benefits. Many pensioners will then make their claim, most by telephone—some 70 per cent tell us that is what they prefer—but others will do so in more traditional ways as they please. We will ask the pensioner about the income he or she expects in retirement. When it is clear—as in most cases it will be—that the income is settled, an award of pension credit will be made.
	Perhaps crucially because—and this has been raised in your Lordships' discussion—all the research indicates that pensioners do not want the intrusion of dealing with the state when it comes to their financial affairs, or in order to reduce it to a minimum, we intend that there will be no review of these affairs for five years. We shall have safeguards. We shall automatically increase income from second pensions when these occur as part of the regular annual increases in these pensions. To do otherwise would drive up the costs of pension credits significantly. Of course, if a pensioner's income decreases during the five-year period, then we will interrupt the award to take that into account. In other words, it is "win win" for the pensioner. The pensioner can always come to us for an uplift if his or her income falls. They do not have to come to us until we review their income, apart from certain major life changes, which will be on a five-year basis. We will also take into account the normal changes in circumstances, such as death of a partner, which already exist within retirement pension.
	This is a real break with the past. It has been widely welcomed by all the relevant organisations. We are seeking to achieve a break with the old means-test attitude. Perhaps I can suggest to Members of the Committee what the amendment does to that concept. First, as I understand the amendment of the noble Baroness, there would be an obligation to base the pension credit income assessment on a past year's income. Understandably, given the irrelevance of past income for new pensioners, the amendment also allows claims to be assessed on estimated income for the next 12 months. The amendment then proposes that the life changes, such as death of a partner, should also be notifiable when they occur. We have no difficulties with that. We share the same approach.
	But then we have a radical departure from where we want to go. According to the amendment of the noble Baroness, at the end of 12 months if the pensioner's income has changed by 10 per cent up or down, over what it was 12 months previously, the pensioner must tell us about it. It is unclear whether that 10 per cent accumulates so that, say, at the end of the fourth year of a five-year period the pensioner has to remember what he or she told us four years earlier and calculate whether that is within the 10 per cent tolerance.
	However, I am not quibbling with the detail of the amendment. The noble Baroness can clarify her views on that. I am arguing as strongly as possible that we must break the weekly reporting of information or even the yearly reporting of that kind of information that ties the ownership of the pensioner's circumstances to us.
	Obviously, a 12-month means test, which is what the noble Baroness proposes, is better than a weekly means test in the eyes of most pensioners. We would argue that giving people an assured level of income for 60 months is better than 12 months. We estimate that at least two-thirds of pensioners are unlikely to see their financial circumstances change within the five-year period, particularly after the first year when people are settling down and maybe giving up modest part-time earnings.
	The noble Baroness can argue that a 10 per cent tolerance up or down is reasonable. But, if I lost £9 of a weekly income of £100 I would not imagine that the state was on my side if it told me not to bother it until I had lost £10. At the moment, if a pensioner loses £1 or £9 he or she can come to us. It is only if it goes up that they do not have to come to us. As the amendment is worded, the noble Baroness would require them not to be able to report losses.
	Equally, if my income rose by more than 10 per cent, I would be troubled that under the amendment I could keep this income for at most 12 months. I would much prefer to be told that I did not need to tell the state about it for five years, rather than 12 months.
	I accept that what the noble Baroness proposes in the amendment in part advances on the present arrangements for pensioners. However, what we propose goes much further. It will free a great many pensioners to enjoy their income without constant inquiry from the state. The question before the Committee is whether a 12-month revisiting of a pensioner's income is more reasonable than a five-year revisiting of a pensioner's income, given that after the first year or so of being a pensioner incomes are fairly predictable. Further, given, that we are so anxious to break the old mentality of means test, intrusion and so on, I hope that the noble Baroness can join with us in what I believe is a generous but decent and proper concept, which is the five-year assessed period.

Baroness Noakes: I thank the noble Baroness for that reply. She reminded me how difficult a job drafting is. As soon as the Minister started commenting on my suggested re-draft of the amendment, I realised that I had not drafted what I had intended. I had intended that there would indeed be a five-year prospective settlement and that it would be based on the most recent year's income, unless, looking forward, one thought that that income might vary by more than 10 per cent, particularly when one becomes a pensioner. I linked the proposal to life-changing events. So I was suggesting that there would be a five-year settlement; it would be based on the most recent year's income unless that was unlikely to be representative of the following year, in which case it would be based on something else. Then it would be left for five years. That avoids the deeming of increases and decreases in income which are included in Clause 7(4).
	The Minister talked about this being "win win" for pensioners and of their being able to go back if their income turned out to be less than the assumed basis. When we come to look at how income from capital, in particular, is calculated later, we find notional calculations. I do not believe that pensioners will know how to go back and ask for a re-assessment or a re-determination of their pension credit. It will leave them confused and they may lose out. I have a number of points. First, I was not trying to turn this into an annual assessment. I was merely trying to say that when it is assessed, if the previous year's income does not look representative, use another year. I confused that in the drafting of the amendment. I apologise for confusing the Minister. Beyond that, I was trying to say, "Let us do it once and then forget it for five years". I am not accepting in this argument that five years is an appropriate period. But if that is what the Government want to do, it is the least interventionist for pensioners because it is over and done with and one does not do prospectively any fancy calculations.

Baroness Hollis of Heigham: The noble Baroness is suggesting that the reason for her proposal is not to change the five-year period but not to take into account any changes in pension levels and any changes in capital. On the first point, that is not reasonable because we automatically update retirement pension. Therefore it follows that we automatically update housing benefit. I do not think that one can automatically update all of that but freeze any assumptions about the income flow coming in from, for example, RPI occupational pensions. They have to be done together. My response to the noble Baroness on that issue is that I do not think that proposal is sensible; we already do it; and there is no reason on God's earth why we should not continue to do that. It is fairly simple.
	On the second point, on capital, we are not looking at actual income, in which case she may have a point; we are looking at notional income drawing from capital. Capital is much more stable. Most pensioners—certainly if my parents are anything to go by—know exactly how much they have in their building society books and so on. That is the level for the most part that we are talking about. They will not know what the actual income is. The point made by the noble Baroness would be much fairer and more viable if we were trying to go for an actual income. There she might well be right. They would not know whether to come down from 4.1 to 3.7 and following calculations. But, given that it is capital, and given, as I say on the first point that retirement pensions are automatically upgraded by the computer and this follows, I hope that the noble Baroness would feel able to withdraw the amendment.
	If there are other particular points about this matter, because it is a very interesting issue, I should be very happy to correspond with the noble Baroness.

Baroness Noakes: I thank the Minister for that reply. I can see how she will want to make later payments of pension credit vary with other benefits. That is quite clear. The difference comes down to savers' income. I heard what the Minister said about that matter. We shall be returning to that issue several more times during Committee. I await those discussions. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Noakes: moved Amendment No. 56:
	Page 5, line 10, leave out subsection (3).

Baroness Noakes: The previous amendment, Amendment No. 55, sought radically to simplify the assessed income period provisions. As anticipated, that did not find favour with the Minister. I anticipate a similar rejection in moving Amendment No. 56, while speaking also to Amendments Nos. 57 and 59. The amendments seek more limited simplifications of part of the Bill.
	Amendments Nos. 56 and 57 delete subsections (3) and (4) of Clause 7. The subsections allow the Department for Work and Pensions to deem a pensioner's income to increase or decrease. The points we discussed a moment ago probably resolve down to the treatment of savings income.
	I shall return to the theme. The treatment of savings income takes a pensioner's income into a fantasy world. Pensioners will be unable to refer easily to that in due course. Claimants can ask for new determinations if their income is less; but I find it difficult to envisage how a pensioner would know when he is dealing with deemed income. What volume of pensioner inquiries seeking redeterminations could the department cope with? I understand that the five-year determination reduces significantly the administrative burden on the department. What level of potential redeterminations can the department cope with if pensioners do not understand whether the system is working to their benefit?
	Amendment No. 59 is another deeming provision. It allows the department to make regulations treating income as some other type of income or to aggregate income sources. I am not clear why the department needs this power. It is not explained in the Explanatory Notes. It is another example of the potential creation of a fantasy world of people's income. I should be grateful for an explanation. I beg to move.

Baroness Hollis of Heigham: The amendments are grouped together because they all seek to amend Clause 7 of the Bill. Clause 7 is an integral part of our proposals for the assessed income period which we rehearsed a moment ago. I do not need to describe why we have the five-year period; we discussed that.
	Amendment No. 56 would have the overall effect of removing the power to set a five-year assessed income period for pensioners aged 65 or more. Clause 7 contains the power to fix a pensioner's retirement provision for five years. It also contains the definition of "retirement provision" which is: retirement pension provision (other than under the Contributions and Benefits Act); income from annuity contracts (other than retirement pension income); and income from capital.
	Subsection (3), which the amendment seeks to remove, contains the power to fix the retirement provision so that it remains the same for the duration of the assessed income period. Without subsection (3) there would be no point to the remaining clauses concerning the assessed income period because there would be no power to fix retirement provision. I know that the noble Baroness did not intend it as a wrecking amendment but it is the closest we have come to one! The very heart of the pension credit proposals will be removed because the effect would be that we would be unable to move away from the weekly means test which, as I have already explained, is a major barrier to pensioners claiming their entitlement. I hope that I have explained the purpose of subsection (3) and justified its inclusion in Clause 7.
	Amendment No. 57 would remove the power to deem known regular changes in a pensioner's income during the assessed income period. Again let me clarify why subsection (4) should remain part of Clause 7. This subsection allows for exceptions to income being fixed within the assessed income period. These exceptions are in line with two principles: safeguarding public expenditure and safeguarding pensioners' overall incomes.
	In terms of protecting public expenditure, we want to ensure that foreseeable and regular changes in retirement provision are taken into account during the course of an assessed income period. We know that in most cases second pensions and annuities are liable to be increased annually. Therefore, we propose taking a power to deem the amount of the increase, thus preventing the need for the pensioner to report those changes every year.
	This power will be within regulations. The intention is that the regulations will provide for the amount of income from a pension or annuity to be deemed to increase from time to time in line with the terms of a pensioner's pension or annuity arrangements. If the noble Baroness wishes to press me on how we shall know in certain circumstances, I am happy to discuss it.
	Accepting Amendment No. 57 would mean, for example, ignoring increases to non-state second pensions. The cost of ignoring such increases alone during the assessed income period would amount to around £1 billion at the end of the five-year period.
	I know that there will be concerns about how we propose to take account of increases in claimants' retirement provision, or indeed changes in other state benefits, during the assessed income period. It may be helpful to the Committee if I spell this out. It is a key point. Our intention is automatically to uprate the pension credit award each year taking into account changes in the state and non-state pensions the pensioner normally has during the five-year assessed income period. The calculation of the retirement provision will be based on information provided by the pensioner at the start of the claim. We know that most private pensions keep pace with inflation. Ninety per cent of them are defined benefit. They are almost all retail prices indexed (RPI'd) because they are largely public sector ones. So, if the pensioner is unable to provide information about the rate at which his or her second pension will be increased, we intend to assume that it is uprated at least in line with prices.
	Let me assure Members of the Committee that if doing that means that a pensioner will lose out—because we are assuming a rate of increase that is too high; in other words it is not being RPI'd— pensioners will be able to ask for their pension credit to be reassessed at any time during the assessed income period. In other words, we will notify pensioners every time there is a change in pension credit annually. Pensioners will be able to compare their actual pension with the amount on their notification. If they wish, we can make inquiries with the pension company on their behalf. We have no reason to think that this will not be an entirely simple, straightforward and easy way of ensuring that, although we shall make RPI assumptions, where that is not the case we shall have the information to make appropriate and speedy adjustments.
	Subsection (4) protects the public purse to the tune of £1 billion and supports our intention to minimise the questions we need to ask pensioners. We need to explore it further only when the pensioner is able to tell us or we know that that pensioner is not being RPI'd in ways we expect.
	Amendment No. 59 seeks to remove the powers to provide continuity in treatment of income streams within the calculation of pension credit. This would mean that the flexibility of administrators to group income streams or to ignore changes of source of payment would be removed from the assessed income period within the pension credit calculation.
	Paragraph (a) of subsection (7) of Clause 7 will allow regulations to provide for income of one description to be treated as income of another description. It sounds technical. The noble Baroness thought that it was fantasy land. It will apply infrequently to only a small number of pensioners. Let me give some examples where we would have needed the power.
	Noble Lords will recall the mess—I do because I was handling a Bill from the Benches opposite—of the Maxwell affair. Pension rights which could not be met from Mirror Group Pensions were paid, at least in part, by a fund made up of donations and charitable payments. We all hope that that situation will not recur. But under the savings credit we would want to be able to treat such payments as retirement provision for the duration of the current assessed income period and reward them through the savings credit. This power would allow us to do just that.
	The most common use of this power would be for pensioners who have a second pension paid by one employer or pensions provider who then merges with another or is taken over by another. In that situation, the pension in payment would, in effect, be the same. However, the liability may well be transferred to, and be discharged by, the new company or a third party. This provision would allow us again to continue to fix this income for the duration of the existing assessed income period and reward it as retirement provision through the savings credit.
	I am sure the noble Baroness will understand this point. I do not need to labour it further. In the light of that explanation, perhaps I can ask the noble Baroness whether she would care to withdraw the amendment.

Baroness Barker: I listened carefully to the Minister's extremely helpful explanation. In her response to Amendment No. 57, she referred to those pensioners who know that their pension funds are not automatically uprated by RPI. If at the time a person retires he knows that his occupational pension will not necessarily be uprated by RPI, will there be the facility in the new system for him to flag that and thereby trigger an annual reassessment of his income?

Baroness Hollis of Heigham: I had hoped that I had made that clear. Absolutely: that is the whole point. If, for example, he does not, although assumptions are being made about his state retirement pension, we shall have to ensure that similar assumptions are not transferred over to his private occupational pension. Therefore, each year the adjustments will be made accordingly.

Baroness Noakes: The basic assumption of pensions being RPI'd is reasonable for public sector pensions, but I cannot believe that that applies to most pensions. It is not a universal practice by any means that private sector pensions are RPI'd. It seems to me to be a potential difficulty as it requires pensioners to reapply for a determination each year just because they have an ordinary private sector pension. In that regard, can the Minister say how many pensioners are likely to be affected? I do not know and I would not know how to decide that problem. If it is a large number I may wish to press the Minister further although perhaps not today.

Baroness Hollis of Heigham: The latest information I can give the noble Baroness comes from the Government Actuary statistics for 1995. I shall check to see if anything later than that is available. The information I have is that public sector defined benefit pension schemes are required by scheme rules to increase pensions annually in line with the RPI and in April. The major defined benefit schemes tend to be those of the Civil Service, local government, the teaching and health professions and the like. The 1995 survey showed that 82 per cent of those holding private sector defined benefit pensions had increases of 2 per cent to 4 per cent, which are close to the RPI of that year which was 3.5 per cent. Fourteen per cent had increases greater than 4 per cent, while only 4 per cent had increases of less than 2 per cent. We do not have information about timing.
	Therefore, in terms of defined benefit schemes, I believe that we are dealing with relatively small numbers. Defined contribution schemes are obviously a different output and the noble Baroness will understand that. As I said, the pensioner will receive from his or her occupational scheme a notification of what they are to receive each year. The pensioner will be able to compare that to the notification received from us saying what we are assuming to be correct. If there is a difference they refer the matter again to us. I do not see that there is a problem given that we are well aware of it. I believe that we have robust systems in place on this matter.

Baroness Noakes: Can the Minister say how many pensioners are in defined contribution schemes? I understand it is 10 per cent. As regards the figure that the Minister quoted for defined benefit schemes, it is quite often the case that such schemes have an RPI of 4 per cent or 5 per cent. The point to which the statistics refer might appear to be giving RPI-type increases, but perhaps they are base level increases which just happen to coincide. It is my experience that when inflation reached high levels, this protection was included so that large increases were not paid out. We might be dealing with quite a number of pensioners. I wonder whether it is right automatically to apply RPI to all of them.

Baroness Hollis of Heigham: Perhaps I may make it clear again. When a pensioner first comes into the system at the age of 65, we shall go over their income with them. We shall take into account what they know about their second pensions and how they are being increased. If they say that it is 2 per cent or 4 per cent or RPI'd, we shall build that into our annual uprating for that pensioner. It is only if the pensioner cannot give us the information at that point that we shall assume an RPI increase. If we do that, and a year or so later the pensioner says that there is a disjunction between what they are told by their occupational pension scheme provider and what we assume to be the situation, the person will return to us. If the pensioner does not know and he or she authorises us to find out, we shall go to the pension provider and seek that information.

Baroness Noakes: I am grateful for that information and I shall consider it further. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 57 not moved.]

Baroness Turner of Camden: moved Amendment No. 58:
	Page 5, line 18, at end insert "and the Secretary of State shall inform the claimant of any changes in the assessed amount and of the effect of that change on his entitlement to state pension credit".

Baroness Turner of Camden: To some extent we have dealt with this area already. The amendment is to subsection (4) of the clause which speaks about the assessed amount being deemed to increase or, in the case of income from capital, to increase or decrease,
	"on such date or dates and by such amounts as may be prescribed".
	We are seeking to add to the subsection the words,
	"and the Secretary of State shall inform the claimant of any changes in the assessed amount and of the effect of that change on his entitlement to state pension credit".
	It is important that the claimant should understand the effect of any assumed changes to his or her income so that if necessary he or she can ask for a fresh determination of the amount of the pension credit. The amendment requires the Secretary of State to provide the relevant information.
	I believe I heard the noble Baroness say, in the course of her response to previous amendments, that arrangements would be made for pensioners to be notified. I am glad to hear that, but if so, what is wrong with putting it on the face of the Bill in the way I have suggested? I beg to move.

Baroness Noakes: I wish to underline some of the points which we were discussing when dealing with the last couple of amendments. These are complex matters. I believe that pensioners may well be very confused about what is happening to the pension credit that they have. It is an excellent amendment in that there is a positive duty to inform the pensioner of a change in the pension credit and at least provide an aide memoire or a reminder to pensioners that they should check that their details are correct. I hope that the notification will also inform the pensioner very clearly what he or she must do if they are concerned about any of the details. I support this amendment.

Baroness Barker: I support the noble Baroness, Lady Turner. I do so because the amendment affords an opportunity to take issue with something the Minister said at the first day of Committee stage. She indicated that it would be a source of relief to many pensioners that these complex calculations will be done by the department. I am sure that it will be given some of the examples which the Minister gave us on an earlier occasion.
	However, I am not sure about that in practice. I believe that there is a danger of likening pensioners to other claimant groups and I am not sure that that is always correct. A number of pensioners worry immensely about benefits and what they receive. That worry is aggravated by the fact that most of them know that they will always be on a low income. Therefore, they worry a great deal that an over-calculation has been made and they will not have extra income to put that right. Therefore, I believe that there is an additional reason besides those already cited by the noble Baronesses for reassuring pensioners that they are receiving what they are entitled to. For that reason I support the noble Baroness, Lady Turner.

Baroness Hollis of Heigham: The amendment of the noble Baroness, Lady Turner, has received support from both Opposition Benches. I approve of it too because that is exactly what we are going to do and what we are already empowered to do under the decision-making Act. The only question is whether we put redundant words on the face of the Bill. There may be an argument for doing that, but it will not change anything. The parliamentary draftsman does not like adding redundant words.
	Amendment No. 58 seeks to ensure that where a change in a pensioner's income from a second pension, annuity contract or capital affects their entitlement to pension credit, the Pension Service will inform the pensioner of that change and its effect.
	I agree that the Pension Service must keep pensioners fully informed of their pension credit entitlement and the effect that any changes in circumstances have on that entitlement. As I said, for the vast majority of pensioners we shall set assessed income periods, usually for five years, during which only limited significant changes—for example, the death of a partner—would need to be reported.
	As I said, as part of our drive and in order to reduce intrusion we will automatically take into account predictable changes such as benefit changes and the annual increase in second pensions such as we have just been discussing. Details of these will be gathered in the five-year period.
	Where there is a change in the level of pension credit entitlement, the Pension Service will send a letter to the pensioner with an explanation of their entitlement prior to and following the change. This will provide—this may help the noble Baroness, Lady Barker—a detailed breakdown of the change and its effect. This should ensure that pensioners understand the change when their payment is altered. That is consistent with the arrangements for handling changes to pensioner's entitlement at present.
	Obviously, we have to ensure that pensioners continue to receive their full pension credit entitlement and that if it is reduced, they can ask for it to be recalculated. That is the substance of the redundant words. Pension credit decisions will fall within the existing legislation on notifying decisions. Section 12(6) of the Social Security Act 1998, which I am sure that Members of the Committee will instantly recall, and the regulations made under it—the Social Security and Child Support (Decisions and Appeals) Regulations 1999—already provide that a person must be given a written notice of decisions which are appealable. That existing statutory obligation will be applied to pension credit by Clause 11 and Schedule 1 to the Bill. So the Pension Service is already obliged to provide what is sought through the amendment under the established legal and operational arrangements that I have outlined. For that reason, I hope that my noble friend and the Committee will agree that this entirely well-intentioned amendment is unnecessary.

Baroness Turner of Camden: I thank my noble friend for that explanation. I still think that there would be no harm in writing that provision into the Bill, but in view of her positive response, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 59 not moved.]

Baroness Noakes: moved Amendment No. 59A:
	Page 5, line 36, leave out subsection (8).

Baroness Noakes: This is a probing amendment. I have read Sections 9 and 10 of the Social Security Act 1988 to try to understand what Clause 7(8) is intended to do, but I must confess that I am none the wiser. The Explanatory Notes say only that nothing in the Bill will affect the powers of the Secretary of State to revise decisions under Section 9. My question to the Minister is: in what circumstances can the Secretary of State use the Section 9 powers to revise a pension credit decision under the Bill? Can they be used to reduce an individual's pension credit? Can they override the setting of an assessed income period? In the cause of enlightenment, I beg to move.

Baroness Hollis of Heigham: Amendment No. 59A would severely undermine the department's ability to recover overpayments. The provision as amended would prevent the decision maker in the local office revising the original decision regarding the claimant's retirement provision if, for example, that decision was based on ignorance of a material fact caused by the fraudulent, deliberate or negligent conduct of the claimant. Under current rules, an overpayment is calculated from the date on which an incorrect award was made, or on which an award became incorrect due to a change in a person's circumstances. Where benefit has been overpaid as a consequence of a person's failure to disclose, or misrepresentation of, a material fact, the department has always sought to recover the amount overpaid. Indeed, not to do so would be contrary to government accounting procedures which require departments to try to recover debts where it is cost-effective to do so.
	The Committee will be aware that a person in receipt of the minimum income guarantee has an ongoing obligation to notify the department of any change in their circumstances. However, pension credit recipients, once the five-year period has begun, will have to notify only major changes. These include when a person becomes a member of a married or unmarried couple, when a person loses their spouse, when a person attains the age of 65, or, where the claimant is a member of a married or unmarried couple, the other member attains the age of 65. The claimant is not obliged to report changes in retirement provision during the assessed income period, though he or she may report such changes if they would result in an increased entitlement to pension credit. As I have said, it is a win/win for pensioners.
	That simplification will ease the burden on claimants to report every change as it happens. But—and this is where the amendment would bite—it is important that the claimant gives us accurate and full information at the start of the claim, as that will be vital to establish not only the correct level of entitlement but whether the five-year period is appropriate. If there are obviously going to be fluctuations during the next year, the five-year period will kick in only when we have a reasonably reliable income forecast. Equally, at the end of the current assessed income period, the same considerations will apply.
	As drafted, the amendment would effectively curtail the department's ability to recover overpayments of pension credit where there had been an incorrect assessment of a person's retirement provision at the start of an assessed income period—where the overpayment may have arisen as a result of fraudulent omissions on the part of the pension credit recipient or their partner.
	For example, Mr X might, at the start of his pension credit claim, deliberately conceal from us the fact that he has two separate occupational pensions. Let us for the sake of argument say that he told us that he had only one occupational pension, and the decision maker decided to set a five year assessed income period. Mr X would be overpaid, for obvious reasons. If the existence of his second occupational pension were discovered at the end of his assessed income period, the amendment would mean that the decision maker could reassess Mr X's entitlement only from that point in time. He could not go back to the original decision, even if it were based on a calculated deceit, revise it and seek to recover the overpayment. In effect, sanctions would be heavily undermined. Such omissions, deliberate or otherwise, do occur. I am sure that none of us would wish to encourage such behaviour.
	Our proposed policy for pension credit is that where an overpayment occurred as a result of a person's failure to disclose, and therefore the entitlement decision was based on a mistake as to a material fact, the claimant would be liable for recovery from the day on which the overpayment occurred. The Government want to be consistent. Were we to accept the amendment, it would create a disparity in the way in which the department treats overpayments of pension credit that arose due to a mistake in the calculation of a person's retirement provision compared with the treatment of overpayments resulting from any other circumstance, such as a non-dependant leaving the household or the repayment of an outstanding mortgage loan. The local decision maker would be able to revise a decision where the claimant misrepresented a fact about his household composition, but not where the claimant had misrepresented a fact about his retirement provision. I am sure that the noble Baroness would accept that that would be absurd.
	To put the provision in statistical context, in the current year the department has sought recovery on 25,000 overpayments from people aged 60 and over receiving MIG. If the amendment were to be accepted, we could not do so in future—or not substantially—and there would be a net loss to the department of £20 million. Depending on when the claimant reported the change, we would be able to pay any other arrears.
	I hope that the noble Baroness will accept that our proposals are reasonable and that the amendment would be an invitation for people to misrepresent incomes and that we would have no means for recovery. Obviously, the vast majority of pensioners try to be as truthful as they can. Sometimes mistakes occur in error, but sometimes we know that they are deliberate. We need the currently available sanctions to continue to operate.

Baroness Noakes: I am grateful to the Minister for that explanation and my enlightenment. Will she clarify one point? She spoke throughout largely in terms of fraudulent misrepresentation. The powers apply to any overpayment where the facts are incorrect, whether because of error or oversight. There is no gradation. The powers will allow the Secretary of State—or the local office—to revise whenever there is a change, for whatever circumstance.

Baroness Hollis of Heigham: Yes, if money has been paid in error, the department has an obligation to seek to recover it. I know from experience that where the department may in part be responsible for an error, it tries to take as sensitive an approach as possible in the circumstances, especially in the case of pensioners, disabled people, people with a mental health problem, and so on. If we do not have such a power, the problem is not so much that there may be an innocent error as that there may be deliberate cheating, which is an entirely different situation.

Baroness Noakes: In the light of what the Minister said, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Turner of Camden: moved Amendment No. 60:
	Page 5, line 39, at end insert—
	"( ) Where a recoverable overpayment of state pension credit has occurred as a result of an error, however caused, in the determination of the amount of an element of the claimant's retirement provision, the amount recoverable shall be limited to the amount overpaid in a period of 12 months or the assessed income period, whichever is shorter."

Baroness Turner of Camden: The amendment covers similar ground to that which we have already discussed. It provides that where a recoverable overpayment of state pension credit is the result of an error, the determination of the amount recoverable should be limited to the amount overpaid in a period of 12 months or the assessed income period, whichever is the shorter.
	Pension credit entitlement is fixed for a period of five years, unlike some other benefits. A relatively small weekly overpayment for which the claimant is held responsible may result in a demand for a very large repayment. The amendment therefore proposes that, in such circumstances, only 12 months' overpayments should be recoverable. I hope that my noble friend will feel that there is some justice in that request, because we are talking about a period of five years, rather than a much shorter one, as in other circumstances. I beg to move.

Baroness Hollis of Heigham: I can give my noble friend Lady Turner of Camden a fairly full answer, and I shall return to one of her points. However, I wonder whether she really needs me to, given the discussion we have already had. What she is saying is that if at the outset of establishing a five-year claim someone deliberately misrepresents their income, and we do not learn that they have done so until five years later, we could recover only one year's worth of the payment obtained by that deliberate cheating. I am sure that that is not what my noble friend intends, but that is the implication of the amendment. I hope that she will not pursue that.
	The amendment would also produce unfairness of treatment. I shall give the Committee an example. Mr A is 65. He has a partner who is 58, who has irregular and intermittent earnings, which prevents our setting an assessed income period. Mr B is 65 and has an assessed income period in force. Both misrepresent the correct amount of their second pension at the start of their respective claims. In both cases, we discover the misrepresentation, say, two years or four years into their claims. In the first case, we would take steps to recover all the overpayment, as Mr A does not have an assessed income period, because his partner's earnings are still fluctuating. However, in Mr B's case, we would be restricted in our recovery of overpaid pension credit to 12 months.
	For those reasons, the advantage that claimants would gain by misrepresenting, knowing that once they were past the 12-month period only the money for 12 months could be clawed back, and, secondly, the discrepancies that would be created between those who had partners below the age of 60—for women—who might still be in the labour market earning a regular income in which case we could recover the money, whereas, if someone had a partner of pension age and a fixed period, we could not, I hope that my noble friend will not pursue the amendment.

Baroness Turner of Camden: I thank the Minister for that explanation, but we are not talking about fraud in the amendment. We are talking about an overpayment that has arisen as a result of an error, not because of a dishonest claim. We tabled the amendment because an error could occur, and a repayment period of up to five years could be rather a heavy commitment for a pensioner. In view of what the Minister has said, I beg leave to withdraw.

Amendment, by leave, withdrawn.
	Clause 7 agreed to.
	Clause 8 agreed to.
	Clause 9 [Duration of assessed income period]:

Lord Hodgson of Astley Abbotts: moved Amendment No. 61:
	Page 6, line 28, leave out "5" and insert "3"

Lord Hodgson of Astley Abbotts: My noble friend Lord Higgins said how much the debate would be illuminated by the presence of regulations, so that we could see the practical implications of what we are discussing. I may have missed them but the noble Baroness, Lady Greengross, put down half a dozen helpful Questions for Written Answer, to which I have not yet seen replies. I would be grateful if they could be made available before Report, because they illuminate several of the issues that we have discussed tonight and at the prior sitting of the Committee. The amendment would reduce the period from five years to three. It takes us over ground covered in the context of recent amendments. I do not wish to weary the House with a long further discussion of the issue.
	We live in a period of extreme financial volatility. Although deemed income—the concept that is the centrepiece of the Bill—does something to damp down that volatility, it is at its most beneficial to pensioners at a time when interest rates and returns on savings are falling, as they will receive the pension credit on the higher amount rather than the lower. However, as we know, what goes down will eventually come up again. Those circumstances are less advantageous for them.
	The Minister talked about the need to break with the weekly report. It is quite a big move to go from a weekly report to a 260-weekly report. I would hope that there might be something in between. I may have misunderstood the exchanges that have gone on in the past 45 minutes. The Minister talked about a win-win situation for pensioners in that they can always apply for a reassessment during the five-year period, but I am concerned that many of them will not. I am not clear as to how they will be notified or encouraged to make that reassessment at a time of rising capital values on which they could get a higher pension credit. It is an extremely complicated piece of legislation, and we have spent a great deal of time getting our mind around it. I fear that many people will just take the money and say, "Thank goodness". It will be hard for them to work out precisely what they are entitled to, particularly if their savings have, in time, increased in value in which case the deemed value that they will get will be rising as well.
	Above all, it is the least sophisticated who will be most affected, those who most need our help and protection. Wherever possible, we should keep in touch with reality. The Bill is full of assumptions—the first £6,000 has a nil return, the next amount has 10 per cent and so on—but we should try to keep people who are in receipt of the credit in touch with reality. Above all, we should try to protect the less sophisticated members of our society, who may be disadvantaged.
	I am not sure that I have this exactly right, and the Minister may be able to tell me that people will be told clearly when they are being disadvantaged. If they are not, if it is not absolutely clear, a three-year period of assessment would have a better effect in ironing out the volatility of financial markets without taking us back to the weekly assessment, with which, I accept, the Minister wishes to break. I beg to move.

Baroness Noakes: We are not convinced that five years is the right period, for the reasons that my noble friend Lord Hodgson of Astley Abbotts has adduced. He made a powerful case for a shorter period, and I hope that the Minister will consider it. Whether the assessed period is three years or five years, the Government should be wholehearted about it. In speaking to Amendments Nos. 63, 64 and 65, which are grouped with Amendment No. 61, I would like to outline a different approach.
	Amendment No. 63 would remove subsections (2) and (3). Subsection (2) allows the Secretary of State to specify a period of shorter than five years or not to specify one at all if the claimant's income is not expected to be typical. A pensioner will be given the prospect of a five-year settlement only to have it whisked away at the whim of the Secretary of State or, in fact, the local official. We cannot see that that is necessary. If the policy is five years, why not just stick with it? There are several other powers to reopen cases, to deem increases or deal with the issue in other ways.
	Amendment No. 64 tackles subsection (4), which sets out the life events that lead to an assessed income period coming to an end. That is fine, but why do the Government need a power to override that in prescribed circumstances? Amendment No. 64, tabled on a probing basis, would remove that power. I shall be interested to hear from the Minister why she thinks that the Government need it.
	Similarly, Amendment No. 65 would take away the power in subsection (5) to regulate for yet more cases in which an assessment period comes to an end beyond the life events specified in subsection (4). If the Minister thinks that the power is necessary, I should be interested to hear about the cases in which it might be appropriate.

Baroness Hollis of Heigham: I shall do my best. In response to the noble Lord, Lord Hodgson of Astley Abbotts, I would say that, at the end of the day, we believe that five years is the right period. Our research shows that, after the first year or so of retirement, there is relatively little change in income that cannot be predicted or built into the retirement pension situation.
	The noble Lord said that there was one thing that was unpredictable—growth in savings, given capital markets and so on. I am sure that he is right, but I must make two points. First, 85 per cent of those on pension credit have savings of less than £6,000 and need not report anything to us. As the noble Lord knows, we could have gone for a much lower deemed return from capital if we had not had that first tranche of exempt moneys. However, we listened to representations from Age Concern, Help the Aged, CABs and other organisations—I hope that I am not attributing views to them improperly—which stated that they would prefer to take out of the system the vast majority of those pensioners who do not make any claims to financial sophistication. That we have done.
	The noble Lord pressed me on the question of how those pensioners holding higher capital—perhaps because their capital has grown—would know that that might lead to a higher element entitled to reward. Pensioners will be notified each year at around the time of uprating of their pension credit entitlement, how it has been worked out and how and when they should let us know about any changes. I have not consulted on this, but I would be happy to ensure that, closer to the time that the provisions come into effect in October 2003, examples of the draft letters are placed in the Library so that noble Lords can reassure themselves of their explicit, transparent and simple qualities.
	It is my experience that all such communications tend to be drawn up in conjunction with the relevant organisations such as Help the Aged and Age Concern because it is in everyone's interests that the situation is made clear.
	Perhaps I may turn to Amendment No. 63, spoken to by the noble Baroness, Lady Noakes, which seeks to remove the power of the Secretary of State to set and assess an income period of under five years or not to set one at all. The point of the subsection is because often, during the first year, there may be irregular earnings or an unpredictable income. The pensioner will then not be in a position to tell us what they expect their income to be. For that reason, we accept their income for one year and then we undertake the five-year assessment once their income has stabilised. That is the reason for the power and perhaps I do not need to explain it in any further detail. Amendment No. 64 would have the effect of always bringing the assessed income period to an end, with no exceptions, in circumstances where the composition of the household changed. The reason for the power is that it could be that one of the changes does not result in a change of income or the appropriate minimum guarantee—for example, where a pensioner does not receive an occupational pension on attaining the age of 65. In that case, it would be wrong to stop the assessed income period, thereby re-examining the pensioner's financial circumstances and removing them from the advantage of having their income fixed for a five-year period, when they know that basically what we are dealing with is RP rising to the £100 fulcrum figure.
	We therefore intend to prescribe in regulations that such a situation should not end the assessed income period and that is the purpose of subsection (4) as drafted. I believe that, in all of these circumstances, our changes work to the advantage of the pensioner.
	Amendment No. 65 would remove the power to set out in regulations the times at which or the circumstances in which an assessed income period would end. I have already described those, which cover not only changes in household composition but also include situations where pension credit entitlement ends. That could happen, for example, where the pensioner and/or their partner went to live abroad permanently. A further example could be where a partner, aged under 60, of a pensioner becomes entitled to a social security benefit which is sufficient to increase the couple's income above the pension credit upper limit. I cite here contribution-based JSA or IB. Changes could also take place which, while not ending pension credit entitlement, could produce a significant change in the pensioner's overall income stream—for example, if the younger partner of a pensioner starts work. If that were the case, it would be necessary to stop the assessed income period so that the amount of earnings could be regularly checked until a consistent pattern could be established.
	At the moment, all parties are reasonably confident that, once stable incomes have been established, the five-year period can kick in. But there are circumstances above and beyond the re-formation of the household, either through a new relationship or if someone dies—one partner could go into hospital on a permanent basis, or move into long-term care—which might affect the moneys to which they would be entitled. We need powers in the regulations to meet those circumstances.
	Perhaps I could enlarge on some of the examples requested by the noble Baroness, but I hope that I have now sufficiently addressed her points.

Baroness Noakes: I thank the Minister for her extremely helpful response. Can she estimate roughly how many assessed income periods are likely to be under five years; namely, how often these powers of variation are likely to be used?

Baroness Hollis of Heigham: We expect something in the order of two-thirds of all pension assessments to run for the full five years. Within the one-third that will not will be included those which may experience a delay of a year or so. For example, if someone is 65 years old, but their partner is only 57 and has several years left to work, it may be several years before a stable income is established. There is also the possibility that some pensioners' incomes themselves may change, rising or falling, and that they would wish to report those changes.
	We are expecting, more or less from day one, that two-thirds of all pensioners will be entitled to the five-year assessment period. The reasons why the remainder will not be entitled stem from a variety of causes.

Lord Hodgson of Astley Abbotts: I am grateful to the Minister for her full comments. I do not think that I heard her respond concerning the Questions for Written Answer tabled by the noble Baroness, Lady Greengross.

Baroness Hollis of Heigham: I do apologise. The Answers to those Questions were tabled yesterday.

Lord Hodgson of Astley Abbotts: I thank the noble Baroness. This was of course a probing amendment. As I said earlier, it covers some of the ground that we have discussed on previous occasions. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Barker: moved Amendment No. 62:
	Page 6, line 28, at end insert—
	"( ) Where a claimant is in receipt of housing benefit or council tax benefit (or both), regulations may provide for the pension credit assessed income period to apply also to such benefits."

Baroness Barker: On the first day in Committee we touched on the matter of housing benefit in relation to Amendment No. 22 moved by the noble Lord, Lord Higgins. This amendment is slightly different. It deals with the vexed question—I think it is right to call it that—of housing benefit and council tax administration.
	In 1998, 2.6 million people aged 60 or over were in receipt of council tax benefit, while 1.8 million received housing benefit. Currently housing benefit and council tax benefit awards last for up to 60 weeks, although at present there is no such requirement for renewing MIG claims. For both of those benefits, any change in circumstances, such as even a small increase in income, must be reported and the benefit then reassessed. The noble Baroness has just told the Committee that the period for assessment with regard to pension credit will be five years.
	The purpose of the amendment is to seek to establish whether there will be a similar assessment period of five years with regard to housing benefit and council tax benefit. In our debate on hospital downrating, Members of the Committee referred to the severe problems faced by many pensioners, in particular those on very modest incomes, when their housing benefit and council tax benefit is withdrawn. The Minister will be aware that the reason is that, while most benefits are administered by the department of the noble Baroness, housing benefit and council tax benefit are administered by local authorities.
	In view of all that has been said, it is a fact that pensioner circumstances do not change that much. An alignment of the two would make sense and I hope that the department would be able to accept such a proposal.
	On Thursday last the noble Baroness stated at col. 1632 that:
	"Local authorities will have to identify the new applicable amounts for pensioners. However, given the current state of computerisation, we are not worried about that".—[Official Report, 24/1/02; col. 1632.]
	I wonder whether the noble Baroness may come to regret making that statement, or whether it may return to haunt her. It is possible to deduce from it that there must be some areas of the country which the noble Baroness has not gone round to visit lately. In particular, as I pointed out on the earlier occasion, the administration of housing benefit in some London boroughs is an absolute scandal.
	We on these Benches feel that aligning the two elements would not, in most cases, make a great material difference. If a substantial change took place with regard to a person's eligibility for housing benefit, it would most likely be caused by one of those other factors already outlined by the noble Baroness, such as the death of a partner or a move into long-term care. That is the reason behind our wish to move the amendment. I beg to move.

Lord Higgins: I think that we should keep a score sheet to record which Member of the Committee can rise to their feet with greater speed. At present I believe that the score is two to one in favour of the noble Baroness.
	In proposing this interesting amendment, the noble Baroness, Lady Barker, has suggested that housing benefit provisions might come back to haunt the Minister. Indeed, I think that they have been haunting her for some while. In March 1999, Harriet Harman said that proposals for reform would be brought forward shortly. In June 1999, the Secretary of State said,
	"the present housing benefit can't continue".
	On 28th June 1999, a Treasury source said that housing benefit reform would be,
	"the biggest project facing the Treasury this year".
	And, of course, the Labour Party manifesto had a large paragraph on this particular issue. So, in the context of trying to integrate the two systems, perhaps the Minister can give some indication of where we are in regard to housing benefit because there is fairly general agreement that a number of its aspects are not particularly good.
	On an earlier amendment, the Minister passionately advocated the new five-year proposal—of which, as she knows, we are in favour as a broad principle. We shall have qualifications but, generally speaking, we are in favour of it. As the noble Baroness pointed out, in most circumstances—but not all—it may be a win/win situation for pensioners.
	But, having said that, there is a considerable argument for saying that arrangements should be integrated between housing benefit and the state pension credit. As the noble Baroness who moved the amendment said, if we introduce a five-year system for state pension credit, the situation will not be the same with regard to housing benefit. If the Minister wants a system whereby pensioners know where they stand over a five-year period, there is a case for integrating the two parts of the social security system. Housing benefit and council tax benefit are among the relatively stable elements of the component parts which together make up the total benefit that any individual may receive.
	However, we all know that there are real problems. Even now there are different claim forms for housing benefit among different authorities—we have been arguing for a long time that they should be uniform—and the information exchanged between the Government and local authorities is more in one direction than the other. We will need to establish to what extent the local authorities will be providing the Government with information relevant to the pensions credit, and to what extent the information the Government have on that is in turn related to housing benefit. There is a strong case for applying the five-year principle to all forms of benefit. We shall listen with interest to what the Minister has to say about that.
	My understanding is that the period for housing benefit is 60 weeks as opposed to five years—there is quite a big difference—and some degree of uniformity is necessary if we are to achieve the Minister's declared objective of ensuring that people in receipt of these benefits know where they stand over a five-year period.

Baroness Hollis of Heigham: I am not sure whether the noble Lord is seeking to tempt me into a general debate on housing benefit and its administration. If so, that is for another time and place, but not on this Bill. He knows that we are seeking to reform administration; he knows that a major reform of housing benefit policy has to follow, or be associated with, the reform and restructuring of social housing rent—and that is a 10-year job or longer. That point has been made on previous occasions.

Lord Higgins: Is the Minister saying that, despite the statements in the manifesto, nothing will happen for 10 years?

Baroness Hollis of Heigham: I did not say that. I said that a major overhaul of housing benefit policy would have to follow. For example, it has been proposed to us that there should be a flat rate housing benefit incorporated into IS or JSA. Those kinds of moves, if appropriate, would have to follow a major restructuring of rents. As I have expressed on many occasions in your Lordships' House, we are engaged in significant reforms of housing benefit administration—everything from not sending on the redirect giros to bringing in fraud teams to help local authorities and so on.
	As the noble Baroness explained, Amendment No. 62 seeks to introduce powers which would enable the Secretary of State to make regulations allowing the assessed income period set in pension credit to be applied to housing benefit and CTB. As the noble Lord, Lord Higgins, reminded the Committee, those payments are currently restricted to a maximum of 60 weeks. At the end of that period, local authorities require a new claim. This arrangement is intended to ensure that changes in circumstances do not go unreported. The effect of the amendment would be to allow, in pension credit cases, for the 60-week period to be replaced by the pension credit assessed income period.
	I am glad that this amendment gives me the opportunity to describe in more detail the arrangements we intend to put in place for pensioners receiving pension credit and housing and council tax benefits, which affects some 8 per cent of pensioners. Our aim is to streamline the delivery of benefits to pensioners. The noble Baroness, Lady Barker, is right. There is no point in reducing the requirement for pensioners to report changes in pension credit, on the one hand, but continuing with the current system of annual claims in housing and council tax benefits on the other. There is an opportunity here to make the administration of housing and council tax benefits easier for local authorities, something which I am sure they would welcome.
	We have concluded that where there is an award of pension credit there is no need for local authorities to continue to make regular inquiries about income. Where the guarantee credit is in payment, local authorities will award full housing or council tax benefit automatically. Until the Pension Service tells them otherwise, they will continue to pay benefit. In savings credit only cases, local authorities will need to carry out a full assessment, but we are making an amendment to the Social Security Contributions and Benefits Act via paragraph 3 of Schedule 2 to the Bill which will allow local authorities to use the Pension Service's assessment of the claimant's income for the duration of the assessed income period. This figure will be up-dated throughout the assessed income period to take account of the annual increase in benefits and increases in second pensions.
	I am pleased to tell the Committee that the effect of all this is that we will be doing exactly what the amendment seeks to do. Local authorities will still need to continue to review cases regularly—most tenants have a yearly rent increase and private sector tenancies are subject to the rent officer arrangements—but their inquiries will be limited to matters which concern rent, not the claimant's income. In other words, the claimant's income after the assessed period will be taken over into the housing benefit assessment.
	We are discussing the shape of these new arrangements with local authority associations before finalising the detail. It is right that we should do so in order to give local authorities the opportunity to work with us on the development of those procedures.
	I hope that the noble Baroness is not only satisfied but thrilled, delighted and overwhelmed. I hope she feels that we have gone well beyond her expectations in seeking to ensure that the rules in pension credit and housing and council tax benefit schemes work together. We are adopting a slightly different approach from the one in Amendment No. 62 because we consider that our approach will minimise the burden on local authorities. However, I have every confidence in saying that we believe the outcome will be the same. So, on the basis that the noble Baroness is getting the substance of precisely what she asks, I hope that she will feel able to withdraw her amendment.

Lord Higgins: Obviously I shall leave it to the noble Baroness to reply, but I wish to raise one point. What the Minister has said sounds extremely helpful—and, subject to looking at the small print, we welcome it—but does this give us an opportunity to standardise the claim forms used by local authorities and, indeed, the claim form used for the state pension credit? It is absurd that we should have this multiplicity of forms in different local authorities.

Baroness Hollis of Heigham: We are trying do this and we have issued model forms which we are encouraging local authorities to adopt. I cannot say how far we have reached in that regard, but I shall find out and let the noble Lord know. He is right: the more transparent, simple and similar are the arrangements, the better. We started off with every local authority having its own forms. We are now seeking to establish model forms. Let me see how far that has advanced.

Baroness Barker: I thank the noble Baroness for her extremely helpful reply. I am not sure how to characterise my emotions at this precise moment, so perhaps I should reserve my position until I have had time to read Hansard. If I said that I was mildly chuffed, would that be parliamentary language?
	Joking apart, I have tried to suggest to Members of the Committee that anything that can be done to simplify housing benefit is extremely welcome. The noble Baroness is right to head me off at the pass from having an extensive debate on housing benefit, but it is a source of untold misery for thousands of people. I very much welcome the general thrust of the Minister's remarks. The five-year periods for major benefits that will have a profound effect on people's lives are to be welcomed. I shall go away and no doubt I shall be even more pleased when I read the Minister's remarks in Hansard in detail. I thank her very much. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 63 to 65 not moved.]
	Clause 9 agreed to.
	Clause 10 agreed to.

Baroness Barker: moved Amendment No. 66:
	Before Clause 11, insert the following new clause—
	"BENEFIT CHECK
	(1) The Secretary of State may by regulations provide for the pension service to offer a benefit check to all people who have attained the qualifying age for state pension credit.
	(2) In this Act "a benefit check" means information about possible entitlement to state pension credit to be provided by—
	(a) telephone;
	(b) personal visit to the pension service;
	(c) home visits; and
	(d) other ways as deemed appropriate."

Baroness Barker: I find myself in the same position as the noble Baroness, Lady Greengross, the other night in being uncertain of what is about to happen.
	The amendment refers to benefit checks, which is in the same broad area that we have been discussing with regard to up-take and people's ability to make claims. There was a degree of scepticism on day one of our Committee proceedings about the target for up-take of this new benefit. The Government have been extremely ambitious in setting themselves a target of 100 per cent take-up by year two. Past experience of take-up of income support and MIG shows that that figure is highly ambitious.
	Members of the Committee have talked extensively about the barriers to claiming, not least of which is the complexity of the forms. The Minister spoke at some length about efforts to simplify such forms. She referred earlier to 70 per cent of pensioners who choose to make inquiries by telephone, which takes us into the workings of the new Pension Service. I declare an interest in that I am speaking for the other 30 per cent who will not make claims in that way.
	On such complex proposals it is ambitious to assume that people will feel that they have the wherewithal to begin the process of making a claim. These matters are extremely complex. There are, and will continue to be, pensioners with whom it will not be appropriate to deal by telephone. It will be better for them to have a benefit check in their own homes or in other ways. In saying that, I recognise that one of the main aims behind the proposals is to stop making people do something that they hate, which is spending hours and hours in really—

Baroness Hollis of Heigham: Grotty.

Baroness Barker: The noble Baroness says, "grotty", but I would say downright unpleasant housing benefit offices. I welcome the measure, but some people for reasons of frailty—both physical and mental—language, and other difficulties, need to be dealt with in other ways.
	I wish to raise another matter, which although it is not specific to the Bill, is related to it. I refer to the position of people in residential and nursing care homes, especially those who are self-funded in such homes, who are likely to be spending their savings at a fast rate. I raised this subject at Second Reading. By definition, they are likely to be fairly frail people.
	There is a raft of important issues, not least of which is the effect of pension credit on care charges, and so on. The circumstances of people in residential care are the most likely to have changed. There are also those who are not comfortable using the telephone. Perhaps that will change over time. I remember the noble Baroness saying the other day that the pension credit is very much for pensioners of the future and that current pensioners "are where they are". That may be, but circumstances change, and a system that endeavours to be fair, as this one does, should be flexible enough to cope.
	It may sound mad to many people, but the absence of a local office to attend, which is likely under the proposals, may cause pensioners great concern. For all those reasons, and because I hope that the Government's aim of 100 per cent is not unrealistic, I beg to move.

Lord Higgins: This is an important amendment and refers, to a large extent, to take-up, although later amendments also refer to that issue. I shall defer some of my remarks until we reach that point.
	The amendment of the noble Baroness, Lady Barker, outlines a number of ways in which additional information might be provided to pensioners, such as by telephone, home visits, and so on, but the front end of the issue is the claims form. We have discussed claims forms in previous debates on social security. One of the notable issues was that the size of the present form had been greatly reduced, but the explanatory memorandum had increased proportionately, so that the total number of pages is almost exactly the same.
	At all events, we are now engaged in a vast extension of means testing, and about 5 million people who were not previously in the scheme are now likely to come into it. As has already been said, a number of these people are somewhat above the previous benefits level and have never been involved with the scheme at all, so will be joining it for the first time. It is extremely important that the form should be sensible. Perhaps the Minister will let us have a copy—I assume that it has already been drafted—to give us an idea of how it compares with the previous, difficult ones.
	Given the huge increase in the number of people who will be claiming, will staff numbers increase proportionately? Otherwise, it is unlikely that the provision mentioned in the amendments will be carried out adequately. The latest report on income-related benefits estimates of take-up in 1999-2000 show that take-up is worse, if anything. The report shows that last year 500,000 eligible pensioners were not receiving income support and that this year the figure has risen. For housing benefit, the number has increased from 150,000 to 210,000. For council tax benefit, the figure has increased from just over 1 million to almost 1,250,000. The situation is becoming worse. Indeed, according to that report, the level of take-up is not improving. We have a real problem in this respect. The Government tend to announce that extra sums of money will be devoted to this or that particular benefit, but, in the event, the amount actually distributed is likely to be significantly less because of the take-up problem.
	I stand open to be corrected, but I believe it is right to say that it is not the Government's target of 100 per cent: that 100 per cent is the assumption which has been made in assessing the eventual cost. We know that the costs will not be anywhere near 100 per cent. Therefore, the impression given by mention of these vast amounts of money should be somewhat modified to allow for take-up. Having said that, we must all hope that the actual arrangements made for take-up of the state pension credit will be a great deal better than what we fear could be the outcome. No doubt the Minister will wish to comment on my remarks.

Baroness Hollis of Heigham: The noble Lord, Lord Higgins, is entirely right to say that the 100 per cent figure is not a target. It would be brilliant if that were to happen, but we all know that there is incomplete take-up on all benefits. It is a statement about the cost designed to ensure that that money is available.
	However, I take issue with the noble Lord on a particular phrase that he keeps using. Each time I try to come back at him and each time he refuses to move towards my views—I believe that that is the right way to put it. He speaks about a "vast extension of means testing". It simply will not do to use that phrase when talking about pension credit. We are, for the first time, encouraging those pensioners who have made some effort to help themselves to derive some benefit by keeping the bulk of those modest, small occupational pensions, as opposed to seeing them wiped out by MIG. The noble Lord knows perfectly well that it is precisely because the level of income support, the old MIG, is sufficiently generous between retirement pension and the MIG level—that is, £77 and £100—that people with small pensions who are trapped between those two figures see no gain from it. They will now see a reward in decency and fairness for their own activity. Therefore, to talk about a "vast extension of means testing" is a Stalinist version of Orwellianism, which I hope the noble Lord will not repeat in future.

Lord Higgins: Members on this side of the Committee have accepted that a considerable amount of extra money will go to people with the same pension; we do not dispute that fact. However, the point that I am trying to make in the present context is that a large number of extra people will fall within the means testing system. That is not open to dispute. No doubt the Minister can give us the exact figure. If it is 5 million, or whatever, compared with the present number of those subject to means testing—namely, over a million or less than 2 million—allowance must be made for the number of staff engaged in the process if the take-up target is to be achieved. We are simply asking whether it is the case that the number of staff will be increased proportionately.

Baroness Hollis of Heigham: The number of staff will be increased by about 800 over existing staff levels during the take-up period. I ask the noble Lord not to use that vocabulary about the extension of means testing. We have just—have we not?—spent the past hour discussing the five-year assessment period. Those opposite wish to cut that down to three years, two years, or even one year. That would increase means testing. We are trying to break the link that requires a weekly means test and substitute it with a five- yearly assessed income period. To call that a "vast extension of means testing" as a reward for such saving, as though we were simply writing large the existing system to 5 million more pensioners, is both an unfair and unreasonable use of words.
	There is a serious point behind this argument; indeed, I sometimes take on this point with my noble friends sitting behind me. If one uses such words, they can become a self-fulfilling prophecy, because pensioners will not claim the benefit if the language used suggests that this is about means testing, charity, invasion, and so on. We are trying to promote a language of entitlement—five-year assessments and targeting—by which we can remove stigma and increase information. In future, I trust that noble Lords will join me in seeking to achieve the same objectives.
	Amendment No. 66 seeks to ensure that when customers approach the qualifying age for pension credit, initially age 60, they can get access to information—or "a benefit check", as the noble Baroness describes it in the amendment—about entitlement to pension credit. Like the noble Lord, I am grateful to the noble Baroness for raising the issue. It is a key question and reflects precisely the sort of world that we want the Pension Service to deliver.
	I do not need to repeat the steps that we propose to take, but the Pension Service will play a key role in ensuring that pensioners receive the entitlement that is due to them. We intend to provide a dedicated service for pensioners using modern technology, whether by phone or through the Internet, by post or by face-to-face contact. We aim to give pensioners a better service in the future by providing accurate information to help them make decisions about their future pension provision.
	Many pensioners have told us that they prefer to make contact with us by telephone; indeed, about 75 per cent seek to do so. Business will, therefore, normally be done in that way. However, we shall offer alternative ways to do business with us—for example, by post, by e-mail, by face-to-face contact through our local service, including home visits, if necessary. We shall seek to do all we can to ensure the appropriate take-up, as mentioned by the noble Baroness. Obviously, the simplest way is by telephone. Most pensioners now feel comfortable with that form of contact.
	The local service will also work closely with other locally-based organisations to provide information on the full range of local services of interest to pensioners through outreach and visiting activity. This will be made up of two key elements: direct local services provided by Pension Service staff; and partnership services, where our staff will work with local authorities and voluntary sector organisations, such as Age Concern, to help them in the delivery of their roles. It will take time. The first pension centre will open for business at the beginning of February, with work continuing over the next few years. It means that pensioners will be at the heart of our service.
	For customers approaching state pension age, the Pension Service will seek to establish entitlement to pension credit when we are dealing with their state retirement pension. They will be offered the choice of either telephoning the Pension Service and having an agent fill in the claim form for them, after which it will be posted to them for correction. Alternatively, they can request a claim form and complete it themselves. Exceptionally, if one of our customers is unable to use our telephone, postal or e-channels, a Pension Service visiting officer can go to his or her home to establish entitlement.
	We are trying to do all we can to reach out: we are working with Age Concern and Help the Aged to ensure that they have sufficient information to promote take-up. A key element is involving them in the development stage of our information products, such as forms and leaflets. I have seen some of the early drafts of the latter. I can assure the noble Lord that they are much improved. I am rather cross with myself because I did not bring examples with me today. I could have shown them to the Committee. As I said, they are much better, but they are still not the glossy, simple and easy-to-read forms that we want to see as our final outcome. We need to test these forms with experts to ensure that they meet pensioners' needs; and that is what we propose to do.
	Ensuring that everyone who might be entitled to pension credit actually receives it is a top priority of the Pension Service. We have designed the new service and the benefit to be accessible and customer friendly. For that reason, I hope that Members of the Committee will agree that the noble Baroness's amendment is unnecessary. We are working both locally and nationally with organisations and local authorities. We are devising new forms and extending the telephone service, which, where appropriate, we are backing up with a home visiting service. I believe that nothing will be left undone as a result of our activity.
	In conclusion, perhaps I may bounce this with the Committee: step one will be to convert existing pensioners on MIG—the 1.7 million—over to pension credit; step two, from spring onwards until 2003, will be the general advertising for other pensioners of the benefit to be paid from October 2003; and, thirdly, step three will be writing to all pensioners directly from October 2003, with claims backdated to that date—and that will include those likely to be entitled. I am so pleased to see the noble Earl, Lord Russell, in his place. He will be pleased about the final step. Finally, we are undertaking extensive research to ascertain what obstacles there may be in the way of those who, though entitled to the benefit, are failing to claim, as well as considering any efforts that we can make to overcome the problem. All of this will be backed by local partnership services.
	I hope, therefore, that Members of the Committee agree—I certainly believe it—that the department is making the most extensive efforts possible to ensure that those pensioners who are entitled to it see for the first time a reward for their own savings which would otherwise be lost in the generosity of our MIG payments. I am sure that the Committee will recognise that we are reaching out in ways that are unprecedented.

Lord Hodgson of Astley Abbotts: Before the Minister sits down, will she confirm the number of additional staff? Did I hear a figure of 800? Will that be sufficient to cover the 5 million people who will be entitled to this benefit and provide the service that has been referred to?

Baroness Hollis of Heigham: Yes. At present, the minimum income guarantee is on a weekly means-tested basis. In future, that element of pension credit will be assessed only every five years.

Lord Skelmersdale: Before the noble Baroness, Lady Barker, decides what to do about the amendment—I am sure that the answer will be to withdraw it—perhaps I may ask the Minister a question. She said that many of the investigations and much of the "commerce" between the department, pensions offices and individual potential claimants will be by telephone. Does she realise that for many people on many occasions the use of the telephone is a very frustrating exercise? Will ringback be available?

Baroness Hollis of Heigham: I am delighted to welcome the noble Lord, Lord Skelmersdale, to our deliberations. I thought I was missing something. It is very nice to see him. I do not have a clue about ringback. All I can say is that it was quite a shock to me, when dealing with the Child Support Agency, that that number was among the 10 family-friendly numbers on which a discount was available. I shall see whether the same applies to the Pension Service.

Lord Higgins: Will there be toll free numbers?

Baroness Hollis of Heigham: I believe so. If I am wrong, I shall inform Members of the Committee when we next discuss the issue.

Baroness Barker: I begin by thanking the noble Lord, Lord Higgins, for his correction. I believe that I made an error. However, I was not alone in doing so. Others have come to the same conclusion about the Government's figures regarding take-up. I realise that an unprecedented number of noble Lords are present to hang on my every word. I shall endeavour to be as brief and succinct as possible.
	I hear what the Minister says about the ways in which the Pension Service will work, and in particular the ways in which it will work at local level. I decline to say too much about the detail as I do not wish to stray into areas where I have a conflict of interest.
	The Minister used the word "entitlement". Based on the Government's previous research on income support, the more a benefit is seen as an entitlement, the higher the claims are. The way in which the Pension Service operates must reflect "entitlement". If it does not, it is an expensive and wasteful exercise.
	I could stray into a number of other areas, but I shall not. However, I want to raise a point about language and about black and ethnic minority elders. I should like to know whether we are talking about 800 full-time staff.

Baroness Hollis of Heigham: Additional full-time staff.

Baroness Barker: I trust that the composition of the additional staff will reflect the pensioner population.
	I still believe that it would be helpful to have on the face of the Bill an entitlement to a benefit check. However, at this stage in the proceedings, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	Clause 11 agreed to.

Lord Filkin: I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.
	House resumed.

Lord Filkin: My Lords, before we move to the Statement, perhaps I may remind the House that the Companion indicates that discussion on a Statement should be confined to brief comments and questions for clarification.

Farming and Food

Lord Whitty: My Lords, with the leave of the House, I shall now repeat in the form of a Statement the Answer given by my right honourable friend Margaret Beckett to a Private Notice Question in another place on the report of the Policy Commission on the Future of Farming and Food. The Statement is as follows:
	"The independent Policy Commission on the Future of Farming and Food, chaired by Sir Don Curry, delivered its report to the Government this morning. Copies of the report have been placed in the House Libraries and in the Vote Office.
	"The commission was set up in August of last year in fulfilment of a manifesto commitment. I would like to offer the Government's sincere thanks to Sir Don and each of the commission members for the very hard work they have put in over a short but effective period of consultation. Some 1,000 organisations and individuals have offered their views. To undertake an exercise of this type in five months is indeed both a tall order and a considerable achievement.
	"I very much welcome the report and the very valuable ideas it contains. The commission has delivered what we asked of it: a clear vision of a sustainable, competitive and diverse farming and food sector, playing a dynamic role in the rural economy and delivering effectively and efficiently the environmental outputs that society demands. We wholeheartedly support its broad analysis and conclusions.
	"The key themes identified in the report seem to be the right ones. The year 2001 was a desperately difficult year for farming and rural communities. Foot and mouth was a catastrophe, but as the commission's report makes clear, farming's problems are wider and of longer standing. To make farming viable again, it is vital that we improve the links between farmers, their markets and their consumers, and reinforce the relationship between farming, the countryside and the environment.
	"I am sure the House will understand that having just received this report I am not in a position to give a view on each of the very many specific and detailed recommendations it contains. I shall pick out key proposals.
	"Reform of the CAP is, of course, our long-standing strategic aim. I am very pleased to see that the report endorses the UK Government's strategic objectives in this area.
	"As the report rightly points out, we do already have some mechanisms available in the CAP which allow us to transfer CAP moneys out of production subsidies and into broader rural land management and environmental directions. Modulation is one such means, and the report makes ambitious recommendations to step up drastically the role of modulation. The Government accept that we should explore the use of such mechanisms and endorse the need to consider such shifts very seriously.
	"The commission notes the vital role of farming in contributing to a healthy and attractive environment. Under the England Rural Development Programme we have many schemes in place to enhance and protect the environment and the countryside. The commission's view is that we need to go further. Its proposals for a broad and shallow agri-environment scheme are timely, as we are just embarking on a major review of such schemes.
	"The report makes clear that if we are to have a profitable industry, capable of thriving without production subsidy, there is a need for industry to take action to improve its own performance—for example, by cutting costs, by adding value, and by diversification. There is a role for government as a partner in, and a facilitator of, that process. But the commission says that the impetus must come from the industry itself, working within the food chain as a whole. That is why I am pleased to see, therefore, that the report proposes the creation of a food chain centre to bring together all parts of the supply chain with the aim of monitoring and improving competitiveness.
	"In other areas covered by the report, such as GMs, scrapie eradication, sheep national envelopes and animal disease insurance, the commission appears to have made recommendations which very much work with the grain of what we have been trying to achieve.
	"The report is clear that its recommendations are not just for government, or, within government, just for my department. But we stand ready to work with the food and farming industries as they address the challenges that they face because we need farming to succeed.
	"Mr Speaker, we all need time to consider how best to proceed and to assess the report's financial and other implications. But it is our firm intention that the kind of ideas put forward by the commission will make a substantial contribution towards a new strategy for sustainable, diverse, modern and adaptable farming, integrated with the rest of the food chain and taking into account the needs of the environment and rural economy.
	"We intend to launch such a strategy in the summer, when the detailed policy measures have been developed and drawn up. We will engage stakeholders across the country in that process, beginning in March, when I hope to meet leaders of the farming and food industries and leaders of environmental, consumer and rural interests to discuss how best we should drive forward the agenda set out by the commission. I shall announce further details in due course".
	My Lords, that concludes the Statement.

Baroness Byford: My Lords, I thank the Minister for bringing the Statement to the House this afternoon. I am slightly mystified because he has missed out some sections that were in my report. I hope that he will forgive me if I touch on a couple of those sections. Perhaps I may share them with the House. I also remind the House of my family's farming interests.
	On the report hang the hopes of all within the farming community and of those allied businesses that supply them. As the Minister said, the past five years have been dire. Farm incomes have plummeted and on top of financial disaster came swine fever and the foot and mouth outbreak. A healthy farming industry is crucial to the well-being of our people and of our countryside. Tourism was directly affected by its demise.
	I add my congratulations to Sir Don Curry and to his commission members for having produced a substantial report that comes forward with 31 pages of recommendations. I accept the Minister's comment that it is not possible for any of us to absorb it in such a short time. That is the background against which we look at the report today. I shall touch on a few of the recommendations. Running through many of them is the central tenet that subsidies and price supports must go—and the sooner the better, in the view of the commission.
	Sir Donald and his colleagues are clear that CAP has to be reformed, with a move to the second pillar, and that environmental schemes are to be encouraged, but they must be standardised and their administration simplified. I am sure that the Minister is aware that some farmers are very concerned about the modulation section in the report. They are anxious for it to be phased in and for time to be given to adapt. Does the Minister agree that farmers must collaborate and co-operate in the future? Is he in a position—as he touched on briefly in his Statement—to say how the Government intend to support that?
	Will DEFRA accept the recommendation to lead a study into disease insurance, which, after BSE and FMD, is both essential and likely to be impossible for individual farmers to obtain? On the subject of disease—that was the part that the Minister, by mistake I am sure, missed out—will he explain why there are so few searches for illegally imported foods? Will the Government strengthen the controls and checks as suggested in the report? The Statement said:
	"We have already stepped up checks".
	Will the Minister explain how, where and what?
	How do the Government view the report's recommendations on regulation, particularly the suggested move to a whole-farm approach? There is concern that the proposals could lead to yet more regulatory burdens. Will the Government undertake a cost analysis before new regulatory burdens are brought in for the industry? Will the Government ensure that farmers and food producers in this country do not have to comply by themselves when producers abroad do not comply with the same regulatory burdens?
	The report recommends that DEFRA should devise and implement a comprehensive animal health strategy. When that is taken in conjunction with DEFRA's letter of consultation on animal welfare, does the Minister intend to pursue the Animal Health Bill at this time? I have noticed the difference between the two.
	In the light of the profitability of the horticulture sector, will the Government support the report's recommendation to increase the quota for the seasonal agricultural workers scheme to 50,000 people? Are the Government minded to allow the Horticultural Development Council to engage in promotional activities?
	Does the Minister agree that the red tractor scheme should be developed to be the common standard for all food produced in England? Perhaps he might comment on the fact that the report refers a lot to England and does not tend to touch on the devolved countries. Does he further agree that the red tractor scheme could also cover environmental standards and that the Government should fund the establishment of such a brand? Will the Government also agree to the recommended extra £5 million per annum for three years for processing and marketing grants? Does the Minister further agree that the rural enterprise budget should be substantially increased at the mid-term review? The big crux question is whether the Treasury will make the necessary funds available so that many of the report's suggestions and recommendations will be possible.
	From the foregoing, it will be obvious that the report is wide-ranging. On this side of the House we welcome the long-term strategy on renewables. We also welcome the section on labelling. In particular, we support the suggestion for compulsory country of origin labelling. We welcome the accent on local farm produce. We also welcome the suggestion on educating children so that they have a better knowledge of food and of good nutrition. Does the Minister support such ideas, pointing to a profitable future for an industry that is vital to our country's survival?
	I remind the Minister of the recommendation on page 109, which says:
	"The key objective for public policy"—
	that is government policy, not farmers' policy—
	"should be to reconnect our farming and food industry: to reconnect farming with its markets and the rest of the food chain"—
	and so on. Over the page there is an equally important point:
	"The first question we set ourselves is how we can make farming and food production profitable again, by reconnecting it with the rest of the food chain and with consumers"
	We welcome many aspects of the report, but I have raised some strong questions. Perhaps we shall have a chance to debate them further tomorrow.

Baroness Miller of Chilthorne Domer: My Lords, we on these Benches welcome the report. I congratulate Sir Don Curry, who had to bring together an enormous quantity of evidence and submissions in a very short time and has produced a coherent report as a result. That is very welcome.
	From a quick read, the report makes many excellent points. As the Minister said at the end of his Statement, it should lead to a strategy. We hope that it will not be simply another strategy that sits on the shelf and gathers dust. I should have preferred it if he had been able to come up with a government response to the report recommendation by recommendation, saying what the Government intend to do. There are too many government strategies that are not being implemented at the moment. We do not want this area of work to be another.
	Many of the recommendations are on issues that the Liberal Democrats have been advocating for some time. I shall highlight four. The section on young entrants into farming was particularly strong. Without young entrants there will be no future for farming. We were very pleased to read that section. We were also pleased to read the many practical suggestions on the environmental side. I noticed that the Minister left out the words,
	"That position I fully support"
	from the Statement. I hope that that was simply an oversight and not because he does not support that part of the report.
	We also welcome the sections on labelling, although the recommendations could be further developed. I look forward to the stakeholder discussions on how that might take place. We also felt that the section on reconnecting the food chain was very strong. The report referred to processing units that could be developed by collaborative ventures and the expectation that RDAs should help in that. Farmers have lacked the ability to process what they grow.
	I have some concerns about whether the commission has managed to define the balance between sustainability and competitiveness. We need to grapple further with that issue. Although the report comes up with many good suggestions on how the industry can be more sustainable, it still accepts the validity of the argument for growing food cheap and shipping it far. The report challenges that notion a little when it addresses the issue of animal transport, but it does not present a long-term view. Although it describes a 30-year plan for food and nutrition, it does not say whether, in the next 30 years, it will be sustainable to ship food over long distances, thereby consuming fuel oil. We should address that issue further.
	I hope that the Government will give us a debate in their own time so that we can discuss in detail the 100 recommendations. As the Minister said again in his statement, the issues go beyond DEFRA itself. I therefore particularly welcome the fact that the noble Lord, Lord Hunt of Kings Heath, is in the Chamber. Tomorrow, in our Liberal Democrat-initiated debate, I look forward to hearing his response to the report.
	The need to change farming habits and the subsidy system are two major challenges. Moreover, as the report says, it will take a very long time to change the eating habits of a lifetime. Changing those habits may take even longer as they are not affected by a subsidy system.
	We certainly accept that CAP reform is badly needed, and we have long called for it. However, the United Kingdom Government themselves could do much to address the issue before full reform is achieved. In view of all the report's good suggestions, is the Minister content with the speed with which the shift is being made from the first to the second pillar? Under the CAP rules, the United Kingdom could spend up to 20 per cent of subsidy on the second pillar; historically, we have spent far less. I hope that the Government will consider moving much closer towards that level. The report's suggestions, without the money to back them, will remain as just good ideas. We welcome the report, but we also look forward to the Government acting on it.

Lord Whitty: My Lords, I very much welcome the positive response from both Front Benches to the report's general tenor and main outline. As for the Statement that I made, as opposed to that which both noble Baronesses have in their hands, I read out the Statement as it was delivered in the other place by my right honourable friend. The remaining text represents the Government's position on the report, and it would have resulted in a rather longer Statement.
	I should clarify one or two matters and perhaps thereby clarify the report's aegis. It is a report on farming and food in England. Although development and pursuit of policy in Europe also is a matter for the UK Government, and is touched on in the report, we shall be consulting very closely on it with the devolved administrations as they may have marginally different views. We have to take that into account. The Government also have to consider both the process and all the detailed recommendations. Additionally, we have to consider the financial implications and the timing. Later this year, we have to engage in very substantial and difficult negotiations on the mid-term review of the CAP and on the longer-term changes to the CAP. The report refers to those changes, and it broadly concurs with the UK Government's objectives in the negotiations.
	One of the reasons that we gave the commission a relatively tight timetable was to ensure that we had the clarity of its recommendations, and were able to assist it, in time for the coming spending round, which will end this summer. During that round, we wanted to be able to take into account the full conclusions on the consequent financial commitment. We are therefore saying that the final strategy for English food and farming will be produced in the summer, when we have the final results on the spending side.
	Like others, the noble Baroness, Lady Byford, picked up on the point that the key objectives and recommendations particularly for farming can perhaps be summarised in terms of "reconnection"—reconnection with markets and consumers; reconnection with the food chain in a positive, constructive and profitable way; reconnection with the countryside and the environment; and reconnection with the rural economy as a whole. The interconnection between farming and food was made very evident during the foot and mouth epidemic.
	All those factors are part of the report and are interrelated. However, I do not think that there is, as the noble Baroness, Lady Miller suggested, a conflict between sustainability—which is the keynote of the report—and profitability. Profitability is part of sustainability. We shall not succeed as a food and farming industry unless profits can be made in the industry and unless the industry has a prosperous future. Environmental sustainability—which was a very important part of the report—economic sustainability and social sustainability, to which the noble Baroness, Lady Byford referred, are all objectives that have to be taken into account.
	The noble Baroness, Lady Byford, mentioned various points of clarification. Perhaps the key issue—and the one that has proved most controversial outside this House, in contrast to the general welcome for the report—is modulation. Modulation is the mechanism that already exists in the CAP to transfer from the first to the second pillar. I appreciate that farming organisations have some concern about it and that traditional methods of subsidising farming will be reduced to the extent that we adopt the modulation proposals.
	The Government have some difficulty with the modulation proposition in that, under the rules, the money can be spent on only a relatively small range of expenditure. If we are to go for the report's recommendation of 10 per cent and beyond, it will be necessary to discuss with the European Union and our colleagues the need for greater flexibility in modulation. Therefore, in principle, we support the modulation system and the type of targets outlined in the report. However, we shall need greater flexibility in order to use it effectively.
	The noble Baroness, Lady Byford, also asked how the Government would support farmers during that process. Many of the report's detailed recommendations on advice, support, marketing and processing require the Government's consideration. Broadly speaking, we accept the general direction of those recommendations.
	The noble Baroness also asked about disease insurance, which is a very important and complex issue. Today and later this week, the department is discussing the issue with insurance and farming representatives.
	The noble Baroness asked about imports. There is clear concern about the effectiveness of import controls. I have just three things to say on the disease implications of illegal imports, and I have said them to the House before. First, I recognise that, as the report says, more needs to be done. We are addressing the issue in both European regulations and our own enforcement.
	Secondly, quite a lot has been done to increase the number of checks of commercial goods in containers and of checks at airports. However, I think that more needs to be done to inform the travelling public and on checks and enforcement. There may also have to be greater co-ordination between the various agencies. I hope to make some immediate proposals on that issue.
	Thirdly, in containing the spread of disease, import controls and checks are no substitute for effective bio-security and effective restrictions and movement controls. Even countries that have very tight import checks and controls still have occasional incursions of disease. The point is that, regrettably, those countries are able to stop the spread more effectively than we were able to do in the past months.
	The noble Baroness, Lady Byford, also raised the issue of regulation. Broadly speaking, the Government are very much in favour of the commission's recommendations on moving towards whole-farm forms of certification and a much broader basis for regulation, rather than a multiple and cumulative range of regulatory authorities that farmers have to deal with. It is a more holistic approach. Although it is difficult to get there from here, we agree with the objective and shall pursue it.
	The noble Baroness also asked about the Animal Health Bill. I intend, for immediate purposes, to pursue the Bill in this House because we need those powers should the disease regrettably recur for one reason or another in the coming months. Although there is the longer-term issue of animal health and animal diseases, and the parallel issue of the broader rationalisation of animal welfare procedures, the Animal Health Bill is needed now—as the noble Baroness will have heard me say on Second Reading.
	The noble Baronesses, Lady Byford and Lady Miller, supported some aspects of the commission's work. Certainly the recommendations on new entrants are important and need to be developed. I fully support the general direction of recommendations on the environmental side, despite the fact that I did not read them out. Labelling is an important issue. The issue of support for the industry in terms of processing grants and so forth is also important. As regards seasonal agricultural workers, the figure of 50,000 is perhaps one we would have to consider. We have already had one increase in the seasonal agricultural workers quota and we are considering a further one. That will, of course, also be the subject of an announcement by the Home Office in relation to managed migration for non-professional jobs more generally which will be made relatively soon.
	There is much that is positive in the report and there is much that we need to continue to debate. My noble friend Lord Hunt will deal with some of the issues in the broad ranging debate to be initiated by the noble Lord, Lord Clement-Jones, tomorrow. No doubt we shall return to these issues at a later stage when we have engaged with the stakeholders and during the process of coming up with our strategy for what I hope is a sustainable, prosperous, environmentally sensitive, safe and nutritionally effective policy for food and farming in general. This is a very, very good start. I again thank the commission and I thank the noble Baronesses for their broad support.

Lord Clinton-Davis: My Lords, will my noble friend, whose general approach I applaud, say something about the report's remarks on closer liaison between the farming industry and consumers and the role that the Government will play in that regard? Will he say something about the co-operation that is now envisaged with regard to the devolved areas, particularly in relation to subsidies and the environment? Finally, what role does he envisage—perhaps it is too early to comment on this—should be played by the Government as regards environmental payments?

Lord Whitty: My Lords, many recommendations in the report indicate ways in which the Government can help in bringing farmers in closer touch with consumers. One of the problems with the present subsidy process is that it distorts price signals and market signals to which farmers relate. We believe that a more direct and a more business-like approach, if you like, to farming and its output and also to relationships within the food chain is important. Suspicions and distortions result from the food chain being so extended and remote, particularly in certain sectors. The Government will help the industry to address those problems through the proposed food chain centre. We need to co-operate not only with the industry but also with the devolved administrations in our response to the report.
	As regards environmental payments, clearly one of the considerations for the Government to develop in negotiation with the European Union is how exactly we can shift from pillar one to pillar two and the nature of the environmental support that we intend to give. The commission suggests that we should have a broad and shallow entrance level for agriculture to meet basic and important environmental standards. That seems to us sensible. Many current agri-environment schemes need rationalising both as regards their scope and their bureaucracy. It is a complicated matter but I believe that the commission has it broadly right.

Lord Boardman: My Lords, I am a farmer in partnership with my elder son who is the working partner. I am grateful to the Minister for repeating the Statement but I am concerned about it. Like most noble Lords, I read it quickly and I am not able to discuss points that no doubt will arise on food, retail supermarkets and the like.
	However, as regards farming, I found it unhelpful. The prospects for farming, which is going through a bad time, are conditional upon making fresh terms as regards the CAP. I believe that the noble Lord referred to the year 2002 in that regard, but it is clear in the commission's report that no progress at all will be made before 2005 or 2006. Without serious alterations to the CAP, the scheme to strip farmers of more subsidies—I refer to the modulation payment and moving from one pillar to another—will only worsen their position. I find that extremely depressing.
	The Minister also referred to various provisions for better business training. I do not think that farmers want to be faced with further bureaucracy. During the foot and mouth crisis they suffered immensely from the amount of form filling that was required. The form filling that was required in order to move stock about was quite terrifying. The document referred to trade associations being formed or merged. The NFU used to be feared by Labour governments. Indeed, it is still powerful. I hope that it will exercise its power well in proposing amendments to the commission's proposals.

Lord Whitty: My Lords, I am sorry that the noble Lord made those comments with regard to the NFU. I regret that the NFU has in part rejected a major part of the report. I believe that constructive discussions with the NFU and further consideration will persuade it that, at least in outline, there is much in the report that will help its members and the future of farming. We shall listen to it but it is noticeable that the NFU is the only outside organisation which has condemned a significant part of the report. I accept that it will have problems as regards modulation. I have said that the Government will also have some problems with modulation in its present form. We need to find a way of achieving what the report's objective as regards modulation attempts to achieve. I hope that we can do so in conjunction not only with the NFU but also with the other elements within the food chain.
	The commission's proposals seek to put more money into farming, land management and the rural economy than is the case at the moment. I say that cautiously as that has to be considered in terms of the spending review and we must conduct our own internal negotiations. However, on the basis of the report, no farmer should fear that less money will be allocated to the economy with which they are concerned. However, the nature of it will change. Instead of having distorting production subsidies, the subsidies will increasingly be directed to man management and the delivery of environmental objectives. Over and above that, the ultimate objective is that farmers should operate as any other business. I believe that that is a desirable outcome for most farmers.

Lord Hylton: My Lords, I again declare my financial interest as an organic farmer with a dairy herd. Given our climate and our efficiency at producing grass, I find it surprising that the Statement says nothing whatever about self-sufficiency in milk and milk products and the need to balance imports and exports. I also find it strange that there is not one single solitary word in the Statement about organic farming, although it is mentioned in the report's recommendations. Are the Government aware—they must surely be—that at the present time 70 per cent of the growing consumption of organic food is imported? Would greater emphasis on that sector not help to reduce cereal surpluses, to increase biodiversity and to provide the sustainability on which everyone is so keen at the moment?

Lord Whitty: My Lords, the noble Lord will find that a substantial part of the report deals with organic farming, additional support for organic farming and other measures to increase environmentally sensitive farming. Therefore, organic farming is picked out as an area which deserves further support. As regards targets for self-sufficiency, Sir Don Curry made it clear that that was not an appropriate matter for the commission to consider. We are dealing with a global, competitive environment. However, we obviously believe that the steps that the report recommends the Government to take would lead to a high proportion of our food being produced by British—or, in this context, English—sources. It is therefore not sensible to have a Stalinist plan stating that 79.3 per cent of our production should be for our own consumption. The plan gives to the farming sector and the food chain as a whole the ability to provide good, safe, nutritious food for British consumers. Its ability to meet that is, in a sense, up to it and not a matter for government.

Baroness Carnegy of Lour: My Lords, I have to declare a very peripheral interest in that I am the tenant of a farmer, who farms the farm that I used to farm for 35 years. I now rent my house from him, so I have an interest in that I live in the middle of the farm.
	I hope that the old politics of agriculture will not squash the report and make it impossible to move in relation to it. There is much vision in it. For the first time, it looks in the round at the whole question of the way in which we grow our food. There is much in it on which I hope we shall move forward.
	I say to the Government that everything depends on their moving forward in relation to the CAP. Most of what is suggested in dependent on the CAP being changed. Modulation will help a little. We know that there are problems for everyone in that regard; that approach involves flexibility in one area. It is very important for the Government to press on in this context and to stop prevaricating when they meet our friends in Europe.
	The situation with the devolved administrations is rather strange because the remit did not say that only England was involved. However, the report states on many occasions that it is talking about England. Obviously, the CAP, supermarkets, the food chain and disease relate to the whole of the United Kingdom. It is extremely important for the Government to get the devolved administrations to look very seriously and imaginatively at the report; they should do so now, rather than wait, and begin talking with the Westminster Government about what they will do. This is a UK matter. I beg noble Lords not to be so negative about the report that we do not get anywhere.

Lord Whitty: My Lords, I welcome those remarks. It is important for us to engage the devolved administrations, who have produced their own government strategies. There may be differences between our approaches because there are different types of farming in different parts of the United Kingdom.
	We must have an approach to the CAP that suits all parts of the UK. Reform of the CAP is key in that regard. To be realistic, we shall probably begin to negotiate the mid-term review after the French elections later this year. In that timescale, we shall begin to address the longer-term changes in the CAP, which will come into effect after 2006. In terms of changing the direction of the CAP, this is a crucial time, in view of internal pressures and the pressures from enlargement and the World Trade Organisation agreement. The next two years will see an enormous amount of intensive negotiation on the CAP. That will very much be a government priority.

Lord Rea: My Lords, the Minister will be aware of my interest in food and health. Chapter 5 of the report has some extremely useful recommendations. In fact, they are so good that they could form the basis of—but not the complete policy towards—a national food policy.
	The report promotes one rather nice scheme in particular, which is called the "Food Dudes Programme" and which is intended for schools. The report states:
	"The programme has two main elements: video adventures featuring hero figures called Food Dudes, who like fruit and vegetables and provide effective social models for the children to imitate; and small rewards (stickers, notebooks, pencils) to ensure that children begin to taste the foods".
	The report contains another interesting recommendation. It states:
	"We note . . . that the scheme will demand 1.5 million tonnes of fruit",
	for the school fruits scheme,
	"which English farmers are well-placed to provide. We challenge the industry to rise to this challenge".
	The Government need to give the industry some help in that regard. Fruit production in this country has suffered greatly from imports from the EU and other parts of the world, and many of our orchards have now been grubbed up. The industry will need quite a lot of encouragement to replant and increase production of the sort of fruits that children like.
	I appreciate that that is a question partly for the Department of Health and partly for the Department for Education and Skills but what are the Minister's thoughts on how to encourage farmers to grow more fruit?

Lord Whitty: My Lords, the recommendations on health and healthy eating, particularly in schools, are an important part of this whole jigsaw. My noble friend Lord Hunt reminded me that he recently launched the "five free fruit" scheme—I believe that that is its name—in the West Midlands. It is important that part of the education commitment and the public sector commitment generally should encourage better eating. If the programme is rolled out and generalised, as the commission recommends, there will be a steady, positive and large potential market for English fruit growers. That is the biggest incentive for orchards—marginal orchards—to reconsider their targeting and marketing. Perhaps more importantly for the long term, if we get children eating the amount of fruit that the Department of Health schemes intend them to eat, they will continue that habit for the rest of their lives. To plant an orchard for 40 years is a pretty good investment.

Lord King of Bridgwater: My Lords, I welcome the report, but time is not on the side of the Government or the commission. Perhaps I am influenced by my constituency experiences—my constituency in the west country contained a large number of traditional family farms. The most difficult meeting that I had last year was with a constituent farmer, who asked me to come and see him, his wife and two sons. He asked whether there was a future in farming. I could not honestly say to them—they had a 200-acre farm—that I believed that there was any future in farming.
	The Government's plans and the commission's proposals depend on people. Although there is praise for the proposals about new entrants, as the Minister rightly said, sustainability means profitability, and that means a rewarding career. Unless there is an early prospect of that, there will be a rise in the number of farms that have no successor and which have not had a machine or boot on them for the past two years—I believe that the relevant figures in the report are understated. I could point to land in my constituency to which that applies; hundreds of acres have simply been abandoned because it was not worthwhile continuing. The greatest challenge that we face is that of trying to maintain the industry's morale while these sensible changes are introduced.

Lord Whitty: My Lords, I partly agree with the noble Lord—this matter is part of the challenge that we have to address and the future of relatively small farms is an important part of the jigsaw. Some people have reacted by saying that all of our schemes would prejudice small farms. In fact, the shift to environmental land management support might benefit many of the farms to which the noble Lord referred.
	Having said that, there is no doubt that farming is going through a period of change and that there will be some restructuring. Some farms will merge and some will drop out. The proposals give them the prospect of a longer-term support system, which the public in general and—probably—governments of all parties would continue to support. The present system of support for such farms, which involves production subsidies, has a distorting effect on the market and on consumer prices. That does not have political support in this country or in a large part of Europe. That is why we have to negotiate our way out of the arrangements.
	One of the benefits of successfully improving the CAP would be that at least some of the small farms would have a more sustainable future. I cannot guarantee, and the Government do not attempt to reassure, everybody that they will be here in four or five years' time. However, if we take a 10-year timescale there is a positive future for such farms and a real future for the industry as a whole.

Viscount Bledisloe: My Lords, one passage in the Statement which the noble Lord did not read is:
	"Where we need to regulate, we should seek to do so in better and smarter ways which take account of the burden of regulation upon those on whom they fall".
	Although he did not repeat it, I am very relieved to have heard the noble Lord say to the Front Benches that that is part of government policy.
	However, does he recognise that it is wholly unrealistic and, indeed, depressing and frustrating for farmers to be told that they must become competitive when the supermarkets to which they seek to sell can buy food much cheaper from places overseas which do not have the same regulatory controls and standards? What are the Government going to do to compensate farmers for the additional burdens that they have to bear by reason of regulations in this country which do not apply in countries which grow similar food and export it to us?

Lord Whitty: My Lords, I accept that much of the way in which we regulate and enforce regulation in this country presents a burden to farmers both in terms of time and, consequently, expense. On the other hand, I also believe that in the UK and in Europe as a whole there is likely to be a continued demand for regulation on safety, environmental and animal welfare issues. Our aim is to rationalise the system of enforcement and regulation.
	However, to talk of compensation, except in very specific circumstances, seems to me to be looking backwards and to be an example of the problems which governments have in relation to farmers. The farming lobby has frequently come to us for money following every little jib and jab of change in circumstance when really it should be looking to the bigger picture. I believe that the leaders of the farming unions accept that.
	This is a framework for a bigger picture, and we do not want to return to the situation whereby farmers look for a couple of hundred pounds here and a couple of thousand pounds there. We are looking to a long-term, constant and sustained framework within which farmers will operate and which everyone will understand. Within that, a big factor will be the reduction in the complexity of bureaucracy and in the multiplicity of the number of regulatory agencies with which farmers have to deal. That is an important objective of the Government and it is reflected in this report. I accept the implications of that.

State Pension Credit Bill [HL]

House again in Committee.

Baroness Hollis of Heigham: If I mention to noble Lords that the next amendment is on the subject of polyandry, polygamy and the rest, they may be tempted to stay.

Clause 12 [Polygamous marriages]:

Lord Higgins: moved Amendment No. 67:
	Page 7, line 37, at end insert "or polyandry".

Lord Higgins: In moving Amendment No. 67, perhaps it would also be convenient to speak to Amendments Nos. 68 and 69. I must stress that we on this side of the Committee are not sexist; that is why we want the Bill to refer to polygamy and polyandry. Thus, we come to a more interesting matter.
	First, throughout some 33 years in the other place and four or five years in this House, I cannot remember ever seeing a clause in a Bill which dealt with polygamy. No doubt the Minister will be able to tell us if that is not so. At all events, Clause 12, which apparently seeks to deal with the problem, is very complicated.
	Secondly, perhaps the Minister can tell us approximately how many people are involved in such a situation. The issue refers to a question under a law. I presume that that means that a man in a country other than the United Kingdom can legally marry more than one woman or, alternatively, a woman can marry more than one man. Therefore, essentially it is a matter concerning people from another jurisdiction who are immigrants into the jurisdiction of the United Kingdom.
	Clause 12 refers, as do so many other parts of the Bill, to making regulations. As I said earlier, in our view it is appropriate to use regulations if something is going to vary over time following the enactment of the Bill. But if an issue can be decided now and is not likely to vary over time, then it should be dealt with on the face of the Bill rather than in regulations.
	Therefore, apart from adding the word "polyandry" to "polygamy", the amendment seeks to set out a specific solution to the problem. There are, of course, all kinds of alternatives; for example, a household could be aggregated in line with the approaches which apply elsewhere in social security legislation and the various members of the household could be deemed to comprise a couple. Alternatively, I suppose that one could disregard spouses other than the first wife and make them ineligible for pension credit. Other wives or spouses could then be treated as a single person. There is a whole range of different alternatives.
	The matter about which we are not in the least bit clear in relation to this clause is which of the various alternatives the Government will select. I should have thought that, having given attention to the matter, they would now be in a position to tell us how they are going to deal with it. The amendment suggests that the person and other party in question should be treated as a married couple with additional spouses treated as a single person. That appears to be a straightforward way in which to deal with the matter.
	At all events, I believe that this issue should be cleared up in legislation on the face of the Bill. Having said that, I hope that the noble Baroness can answer the specific questions that I mentioned at the beginning. We can then take the matter from there.

Baroness Barker: Hats off to the noble Lord, Lord Higgins, for tabling one of the most intriguing amendments in a very long time. I found it most interesting. Ever since I read the amendment, I have been racking my brains to think of a nation on earth where polyandry is a legal state. Thus far, I have not been able to find one, but no doubt the Minister has been able to because she has a crew of people who work on such matters. If I were betting, I should put my money on somewhere in Polynesia. However, I shall be interested to find out.

Lord Higgins: It is the principle that is important; one would not want to discriminate.

Baroness Barker: The noble Lord raises an interesting point. The issue appears to concern polygamous marriages which are contracted in nations other than our own by people who live here. I consider that an interesting question to have raised. I pay tribute to the noble Lord, Lord Higgins, and the noble Baroness, Lady Noakes. Throughout our discussions on the Bill they have attempted to clarify matters by drafting, and that has been extremely helpful to our debates. My understanding is that this matter is covered by existing social security law which recognises that some people who are migrants to this country were married abroad in circumstances where polygamy—by and large, it is polygamy—was acceptable and a part of their culture.
	In speaking to the amendment, the noble Lord, Lord Higgins, used the word "problem". When I read the amendment, I tried to ascertain whether a problem existed. Having asked practitioners and researchers, I was interested in the fact that no one is yet sure that there is a problem or, at least, a presenting problem. That is not to say that wives in polygamous marriages do not have problems; it is that those problems are not yet being presented to authorities. It is an interesting question as to whether or not there is a problem. It would be an interesting and useful subject upon which to have some research.
	Noble Lords will have heard me say before that the older population is changing, and patterns of migration to this country mean that it is becoming more diverse. There may be a problem. It is not a pressing problem yet. However, in an inadvertent way the noble Lord, Lord Higgins, has raised an interesting issue. It should not perhaps be addressed in the way in which he addressed it. None the less, it is an interesting point to raise.

Baroness Hollis of Heigham: I am sure that the noble Lord, Lord Higgins, would be sorry to think that his amendment was inadvertent. I am sure that he thought it was very advertent.
	I am fascinated by the Committee's interest in polygamy. This is not the first time that the subject has been raised. I was looking for some help over in a certain quarter. My understanding is that Section 133 of the Social Security Benefits Act 1992, which relates to council tax benefits, also has a specific subsection relating to polygamy. Therefore, this is not entirely new. However, I understand that the noble Lord may not have that cross reference immediately to mind.
	Amendment No. 67 seeks to do a reasonable thing. It looks to give equal recognition in pension credit to the custom of a woman taking several husbands as well as recognising the practice of a man having several wives. However, it is unnecessary. Polygamy includes both men having several wives and women having several husbands. The real distinction is between polyandry and polygyny. I do not know whether the noble Lord lays claim to having studied classics or Greek at school, but "polygamy" is a politically correct word, even if the practice may not be.
	The noble Baroness asks where polyandry is practised, by which she understood it to mean a situation in which a woman has several husbands. She knew perfectly well that I would not be able to resist the temptation of trying to find out. Polyandry, unlike polygamy, is prohibited by law in most countries. I am told that two principal forms of polyandry exist, and they are not in Polynesia. Among the Nair people who inhabit the Malabar coast of India a woman may marry several men of equal or superior rank, known by anthropologists as the Nair family. The system also includes the matrilineal social structure, in which children are included in the mother's clan and property is inherited in the female line.
	Another distinct type of polyandry is practised in areas of Tibet. In that form a woman may marry the eldest brother of a family and then take his brother also as her partner. Certainly the first form is a way of keeping property going down the female line. I thought that I would share the diffusion of useless knowledge with noble Lords.
	Amendment No. 68 seeks to recognise the fact that in a polygamous marriage a person might have more than one additional spouse. Likewise, the Bill also deals with that. Under the Interpretation Act 1978, terms expressed in the singular can be taken to include the plural. So, the phrase "any additional spouse" can justifiably be read as "any additional spouses". Amendment No. 69 is more significant, however, in that it would have the effect of treating the first two members of a polygamous marriage as a married couple, with subsequent spouses treated as single people. I should like to explain to the House why we do not believe that that would be an appropriate approach to people living in such households.
	We had a similar discussion on one of the other pension Bills within the memory of noble Lords. As noble Lords will know, the MIG regulations, along with those of other income-related benefits, make provision for those circumstances. Where a polygamously married household exists, a special assessment is made of the amount of benefit payable to the household. We do not know how many, but we think that we are probably talking in the order of not more than 200 households. That is based on the couple rate of benefit for the claimant and his first spouse, and the difference between the couple rate and single person rate of benefit, which is payable for each subsequent spouse. Therefore, the second wife gets the addition of what the first wife would get to the original single person's allowance, and so on down the line. In addition, the financial resources of each member of the polygamous marriage are aggregated. I believe that that seems reasonable and provides a basis for dealing with the situation.
	A glance at Clause 12, with which the amendment is grouped but to which the noble Lord did not speak, reveals that we are dealing with the same basic structure as with MIG: an unambiguous definition of what is meant by a polygamous marriage and provision to prescribe for a non- standard amount of pension credit and aggregation of the household resources. In the light of those comments, I hope that the noble Lord will feel able to withdraw the amendment.

Baroness Noakes: Before the Minister sits down, can she tell the Committee how she intends to treat unmarried polygamous family units?

Baroness Hollis of Heigham: I suspect that that would be blasphemous. If a person has a polygamous marriage and comes to the UK, that is being incorporated into the UK from outside. If such persons come over here as a couple and then acquire a subsequent "spouse", that "spouse" is not legal under British law and would be a mistress. There is no recognition in social security law of funding for a mistress as well as a wife for a UK resident. If I have misled the noble Baroness or in any sense cramped her or anyone else's aspirations, I shall seek to ensure that my comments are correct.

Lord Higgins: On the last point, I would have said that that is bigamy. Despite the clear explanation given by the noble Baroness, I am still unclear as to why this needs to be in regulations. I am not in the least clear about why we cannot simply put it on the face of the Bill. Presumably this is something which will not change. The noble Baroness has set this out clearly. Therefore, I would have thought that she could table an amendment on Report which puts on the face of the Bill exactly what she has just said.
	I turn to the amount of state pension credit which such individuals receive. I presume that they would all have become UK citizens at this point. Will they receive state pension credit—I emphasise "state"—as a result of this legislation if they arrive in this country as a polygamous household but are not UK citizens? The noble Baroness mentioned that there are 200. Presumably that is 200 households. Will they also receive widows' pensions, for example? Once we go down that particular route, I am not sure where the matter ends.

Baroness Hollis of Heigham: Neither am I, given the world that the noble Lord has opened up. As I understand it, for eligibility to income-related benefits, one has to establish habitual residence in this country. Therefore, persons in this situation who have come to this country in their sixties or seventies—it is hard to work out what family permutations might be possible—might well not have a complete retirement pension record; that seems probable. They would need to pass the habitual residence test and not fall foul of refugees' exceptional leave to remain, asylum status and so forth. They might be elderly relatives of someone who is already resident here. Normally, they would have to show that they would not be dependent upon public funds. However, if they were entitled for whatever reason under the habitual residence test, they would then be eligible for minimum income guarantee. In that sense, they would receive part of the state pension credit in the form of MIG. In response to the noble Lord, it seems unlikely that they would be eligible for the savings element of the pension credit.
	I am told that since August 1998 immigration legislation has prevented a polygamous wife settling in Great Britain with her husband if another wife is already in the country. Given that, the number of polygamous households in Great Britain should diminish over time.
	The figure of 200 was the approximate figure we have of those households eligible to claim MIG. I find it hard to envisage circumstances, other than in a handful of cases, in which someone has a complete retirement pension—that is, that he has been here for a working life of 40 years—and savings from an occupational pension, and all of his marriages occurred legitimately outside the UK. It is conceivable. I hope that answers the noble Lord.
	The basic arrangement is that for one of the marriages—presumably that to the first wife—the members are treated as husband and wife. Subsequent wives are treated as dependants receiving the same moneys. The noble Lord asked why this is being done by regulation. In the light of changes perhaps in immigration law, for example, it is conceivable that legislation might need to change in future. Having a regulation power to amplify the words in the Bill seems to me to be a wise precaution.
	Given the concepts of human rights and so on, it is not impossible that attitudes and conventions and the responses of government to the treatment of polygamy may change over time. Therefore, the Government might want to revisit this matter at some unspecified date in the future. It is not wise to do that through primary legislation.

Lord Higgins: I am grateful to the Minister for that further comment. I do not want to prolong proceedings unnecessarily. This subject is rather like peeling an onion—one keeps getting more and more layers that one did not expect. The noble Baroness has now suddenly said that, since 1998, if one was polygamously married quite legally in another country, one can bring in only one wife.

Baroness Hollis of Heigham: I did not actually say that. I said, prevented from settling in Great Britain with a husband if another wife is already in the country. In other words, going back and importing yet another one in.

Lord Higgins: I understand. Otherwise one is slap into the Human Rights Act problems. I think that we should study carefully what the noble Baroness has said to see what further complications may ensue. If anything, the matter is more complicated than I had supposed. I am grateful to the noble Baroness, as always, for her extremely clear exposition. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 68 and 69 not moved.]
	Clause 12 agreed to.
	Clause 13 [Transitional provisions]:

Lord Higgins: moved Amendment No. 70:
	Page 8, line 18, at end insert "or"

Lord Higgins: In moving Amendment No. 70, standing in my name and that of my noble friend Lady Noakes, I shall speak also to Amendment No. 71.
	Amendment No. 71 is a rather unusual amendment. It seeks to knock out the words "or savings" from Clause 13(1). Clause 13(1) states:
	"The Secretary of State may by regulations make such transitional provision, consequential provisions or savings as he considers necessary or expedient for the purposes of, or in connection with",
	and so on. I am not clear how the Secretary of State makes savings. It seems to me that that is probably a misprint. Am I right or wrong? I beg to move.

Baroness Hollis of Heigham: I can well understand the noble Lord's perplexity. It is a quite technical matter. He may see the need for the words after I have explained the matter to him.
	The amendment limits the power of the Secretary of State to introduce regulations that will protect pensioners who get income support—MIG—immediately prior to the introduction of state pension credit.
	Clause 13 provides for the transitional powers that the Secretary of State will require in order to provide for the smooth transfer of 1.8 million pensioners from the current system of financial support in income support to state pension credit. Subsection (1) provides the power to make transitional, consequential and savings provisions. The distinction between them is quite technical. A savings provision preserves the effect of a provision that has been repealed or amended. It is normally applied in limited cases so as to preserve rights that have accrued under those provisions.
	It is essential that the Secretary of State has a range of powers available to him to introduce regulations that will enable him to transfer people from MIG to pension credit without fuss and hassle. It would be unfair on these pensioners if they could lose income because the Secretary of State had not been granted the power to protect them.
	No one will lose out. It is the Government's intention to ensure that a person who should qualify for protected support under the IS scheme will not lose out from the introduction of state pension credit, and that the calculation of their new entitlement will take account of the protection they receive. We do not think that there are any such people whom we would not cover by the transitional regulations. But if there are, the power to save existing provisions will ensure that if any unforeseen issues are identified before the introduction of state pension credit the Secretary of State will be able to protect the very small number of people who could be affected. Any provisions made under the savings power would then work in tandem with any of the other arrangements for transition.
	Previous social security legislation has included powers that have permitted successive Secretaries of State to protect the position of people who transfer from one scheme to another. It seems unwise to depart from this principle now.
	State pension credit is being introduced to improve the financial position of many pensioners. It makes little sense to penalise some of the poorer pensioners by removing these essentially protective transitional powers. With that explanation, I hope that the noble Lord will feel able to withdraw his amendment.

Lord Higgins: I am sure that the draftsman gave careful attention to the provision. But it seems to me that if there is not a misprint, there is a word missing. If one leaves out the transition and consequential provisions and so on, Clause 13(1) reads:
	"The Secretary of State may by regulations make such . . . savings as he considers necessary or expedient".
	It may be that he can make savings provisions, but there is no way in which he makes savings in any possible normal interpretation of the word.

Baroness Hollis of Heigham: The noble Lord is confusing "savings" in the form of cash savings, which is not what the matter is about, and saving an existing right or entitlement. That is the point about transitional protection. I agree with the noble Lord that the provision does not bear the conventional use of the word "savings". This is a quasi-legal term. It is a power to save for a few individuals the current rights that they enjoy. Without that power, he might be able to pick up only the people not protected by conventional transitional arrangements.

Lord Hodgson of Astley Abbotts: Would it be helpful if the word "legislative" was inserted in front of the word "savings"?

Baroness Hollis of Heigham: This is a fairly conventional clause which is put into all changes as a form of belt-and-braces safety net in case there are some instances which are not caught up by the conventional regulations which offer transitional protection. Some benefits one keeps for ever and a day—for example, invalidity benefit going over to incapacity benefit. With others one takes the people out, and so on. But one needs the extra power. The word "savings" is often used to refer to savings provisions. I can understand why the noble Lord has perhaps assumed that the term relates to cash savings. But it does not. It is about keeping those powers available.

Lord Higgins: I did not suppose that "savings" related to cash savings. It simply did not make sense. It may be a technical expression. I do not know to what extent it has ever been challenged in the courts or elsewhere, but on the grounds of clear drafting and so on, it is a remarkably esoteric and unnecessarily obscure way of putting the matter. If the provision simply wants to say that the Secretary of State may preserve existing provisions as a transitional arrangement, that would be sensible. I do not want to press the point. But it is not a satisfactory way of drafting legislation. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 71 not moved.]
	Clause 13 agreed to.
	Clause 14 agreed to.
	Clause 15 [Income and capital]:

Lord Dean of Harptree: If Amendment No. 72 is agreed to, I shall not be able to call Amendments Nos. 73 to 81 inclusive on grounds of pre-emption.

Baroness Noakes: moved Amendment No. 72:
	Page 9, line 6, leave out subsection (1) and insert—
	"(1) Income and capital shall be defined and treated as for income tax purposes."

Baroness Noakes: We now turn to a large batch of amendments which deal with an important part of the Bill; namely, the definition of income and capital. I referred in previous amendments to different definitions of income used in the Bill. All of these, to a greater or lesser extent, draw on the definitions of income and capital that are contained in Clause 15. There are a number of concerns which will be explored in the amendments. They are partly about the theoretical bases of the calculations and getting clarity about what is and what is not intended. Lying behind a number of these amendments are some practical issues and, in particular, the impact on savings. That is an important aim which the Government have and which we, on these Benches, share.
	Amendment No. 72 is a probing amendment. It deals with the complication of defining income and capital in the Bill. It eliminates the list of income sources in subsection (1) and in later regulations and replaces it with the simple concept of using the definitions that have been developed and are used for income tax purposes.
	I am sure the Committee will be aware that there is an extensive body of case law about whether something is or is not income for the purposes of tax rules. I suggest that we use that. I am well aware that the Department for Work and Pensions has developed over the years its own rules on what it treats as income, capital and so on. However, in the interests of simplicity, accessibility and understanding, I suggest that the income tax rules are a good basis. It is the Inland Revenue's core business to define income, to spot new forms of income which may not have been brought previously within the net. On the ground of public sector efficiency income might be left to the Inland Revenue while the Department for Work and Pensions deals with its core role—calculating and paying benefits.
	I refer to the Government's consultation paper on pension credit in November 2000. In referring to the integration of tax and benefits, the aspiration was expressed of making the pension credit more automatic and reducing overlap between the tax and benefit systems. The paper states:
	"The Government will look to the tax system to consider whether there could be alignment with tax rules on the treatment of income, smoothing the path to greater tax benefit integration in due course".
	That is very laudable. However, the way in which the pension credit has been constructed goes completely against that aim because it uses income concepts which are in some cases alien to those for income tax purposes and, in particular, the deeming of income to which we shall refer later.
	I hope that this simpler approach—it will be consistent with the Government's aims for the tax and benefit system and more understandable and simpler for those dealing with the system—will be commend itself. I beg to move.

Baroness Hollis of Heigham: The big difference is that something like 1.7 or 1.8 million pensioners currently enjoy minimum income guarantee under social security legislation. I understand that only about 70,000 or so (if that) of pensioners who will be entitled to state pension credit pay tax. Therefore, to move all those on to a tax basis would seem to be folly.
	Amendment No. 72 seeks to bring the treatment of income in pension credit fully into line with the tax system. Pension credit and its new income assessment share many of the objectives of the new tax credits, both incorporating longer awards and a simpler administration process. But we designed pension credit to suit the needs of pensioners. It is more tax-like, wherever that made sense, but we are not being driven by dogma.
	Pensioners themselves are not interested in the arguments about tax-like or benefit-like systems. Most do not pay tax. They will be more interested in whether we can deliver a system effectively meeting their needs without stigma—the word used by the noble Baroness, Lady Barker—which they see as an entitlement and, therefore, have no hesitation and no obstacle to claiming. That is why we have concentrated on designing a system that effectively gives extra money to pensioners who need it most as well as rewarding thrift when we come to the savings element.
	Research has demonstrated concerns about the claims process and weekly means tests. We have gone to the five-year period. The tax system and the new tax credits deal with a quite different group of people from the group pension credit has been designed to help. Unlike people of working age—those are the people the tax credits deal with—pension credit has been designed to help pensioners. Few pensioners have contact with the tax system. Pensioners' income fluctuates much less than the incomes of the working age population. Pension credit is not taxable. So where a tax-like approach was not sensible, we chose a different solution for pension credit.
	For instance, the new tax credits will usually assess someone on the basis of their income over the previous year. That relates back to an earlier discussion. This approach is sensible in that context because earnings do fluctuate and vary. It could not work well for pension credit.
	Another example is the treatment of capital in pension credit. In the consultation document we said that we would consider the options for reforming the system to take income from capital into account. We could follow the tax system and take actual income and savings into account but we have listened to pensioner groups which said that pensioners would find it onerous and complex to record actual income from their savings. What is gross? What is net? We decided, therefore, on the notional rather than actual rate of return, plus the £6,000 disregard. This will be simpler for pensioners who will not have to declare precisely how much interest they have received.
	Not following the tax-like approach here has also allowed us to deliver on our objective of taking many pensioners out of the capital rules—by ignoring the first £6,000 of savings. I hope that the Committee agrees that this makes better sense. When I referred to 70,000 who may pay tax, I should have said that 70,000 people may come within the new tax credit framework, not necessarily paying tax.
	The noble Baroness referred to the consultation document. In that document we said that we sought to simplify and raise the guaranteed minimum income level to over £100 a week by 2003. We are doing that. We said that we wanted to replace the old pound for pound withdrawal system by a much fairer system which would abolish the savings trap. We are doing that. We said that we would abolish the capital rules and replace them with an income test more in line with the income tax system. We are not doing that, as I have said, because we listened to pensioners and pensioner groups prefer the approach that we have adopted. That was not necessarily our first thought but it is so after consultation. That is the point of a consultation paper.
	We said that we would move away from the intrusive weekly means test to a system where awards are fixed over much longer time periods. We are doing that. We said that we would reduce the income tax burden on pensioners by raising the personal tax allowances available to those aged 65 or over. We are doing that.
	In terms of the consultation document to which the noble Baroness referred, we have met our proposals apart from that on the treatment of capital, and there we have moved in response to pensioners' organisations and the consultation exercise. That is, of course, what a consultation exercise is for.
	In the light of this response, I hope that the noble Baroness will feel able to withdraw the amendment.

Baroness Barker: Before the Minister sits down, will she clarify her statement about the 70,000 pensioners coming within the new tax credit framework? I should find that enormously helpful.

Baroness Hollis of Heigham: This relates to questions about earnings: those aged between 60 and 64 who may or may not be in the labour market. I understand that 70,000 people could get pension credit and the new tax credit. I do not have figures on how many on pension credit will pay tax. The figure could be 10 or 15 per cent. None the less, compared with the fact that 1.7 million pensioners of those we are targeting are currently on minimum income guarantee, it is a substantial number.

Baroness Noakes: If the figure of 70,000 relates to the 1.9 million on MIG, how many does the Minister estimate will receive the pension credit? It is a considerably higher number.

Baroness Hollis of Heigham: We estimate the number receiving pension credit to be between 5.5 and 6 million in the total scheme.

Baroness Noakes: Of those, how many does the noble Baroness estimate will pay tax?

Baroness Hollis of Heigham: I cannot give the precise figure. I cannot give a breakdown between the two. It depends on the size of the family, whether one refers to singles or couples. We think that the figure may be 10 or 15 per cent.

Baroness Noakes: I cannot say that I am surprised by what the Minister said. Pensioners normally come from a working environment. They learn the concepts about how their income is taxed. The Minister seeks to create a system where pensioners feel that they can claim the pension credit without stigma. Would not it be easier if the in-work treatment of income were moved to pensions?
	The pension credit feels more like a core social security benefit, with means-testing and all that goes with it, and the problems of it not being taken up rather than an extension of a pension entitlement. The noble Baroness was keen to stress that factor earlier when we referred to means-tested benefit. I believe the department is missing an opportunity.

Baroness Hollis of Heigham: Before the noble Baroness sits down, perhaps I may point out that, given that about three-quarters of the number of pensioners do not pay tax and that the tax threshold for those aged over 75 kicks in at about £6,200 after personal allowances, she can see the point at which the provision begins. Is the noble Baroness really saying that she would wish to bring all the other pensioners into a regime which meant that they would have to have annual assessments of their income based on the tax system?

Baroness Noakes: Perhaps I may clarify the situation. In moving this amendment I did not say that I was moving toward an annual assessment. It is a separate issue as to whether one can combine the tax and benefit system at some stage where one would move to assessment on an annual basis. I am simply moving an amendment which states that how one calculates income is not by any deemed rules or putting things in or out, but one would simply use whatever the income tax system used as income. It is not the same as moving to an annual basis for assessment, but using the concept of income which has no additional need for regulation put forward by the department. There is both statute and case law about what is and what is not income.
	My only point was that they are a set of concepts broadly familiar to those who have been in work and who have dealt with the income tax rules in their lives, notwithstanding the fact that when they retire many of them fall out of the tax net. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Higgins: moved Amendment No. 73:
	Page 9, line 6, after "In" insert "calculating re-entitlement to a state pension credit, any income or capital gains on a PEP or an ISA shall be completely disregarded, and subject to this, in"

Lord Higgins: In moving this amendment I believe that it will be convenient to speak to Amendments Nos. 82 and 83. As the Committee will realise, Amendment No. 73 contains one possible formulation of the point we wish to raise and Amendments Nos. 82 and 83 are alternatives in rather more technical language.
	Quite simply, the amendments we are now considering are concerned with the definition of an income. In these amendments we are suggesting that income from PEPs and ISAs should not be included. On the whole, the intiatives taken by Chancellors on PEPs and ISAs have been very successful in doing something to increase the level of savings. A crucial point about them, which I believe many people found to be greatly convenient, is that one does not have to include them in the income tax return: they are totally out with the existing system.
	As the noble Baroness said a moment or two ago, it is true that a very large percentage of pensioners do not pay tax anyway. I could not help wondering to what extent they have been slightly terrified by those unbelievably moronic adverts on television which keep asking people whether they have sent in their tax return. They might have given considerable worry to many pensioners who, as the noble Baroness has pointed out, do not pay tax but may have wondered in the circumstances whether they were supposed to.
	As regards these amendments, there would appear to be a strong case for excluding any income or capital consequences—perhaps the noble Baroness can tell us whether it is relevant as regards the capital arrangements—to preserve the incentive which successive Chancellors have given for individuals to save. I believe that the present arrangement is convenient.
	Of course, it is the case that many people, particularly those who have been driven away from with-profits funds with insurance companies and all the problems they have been running into, have been recommended in the Sunday papers to choose ISAs or PEPs rather than some other form of pension provision. From the wording of Clause 15 as it now stands, I am not absolutely clear whether or not other retirement pension income is to be included in the definition of earnings. If not, there seems to be a very strong case for excluding any income from ISAs and PEPs. I hope that the noble Baroness can clarify the situation as regards these two forms of saving. I beg to move.

Baroness Hollis of Heigham: The provisions in Clause 15 abolish the rules that exclude pensioners with £12,000 or more of savings from any help. As we have said, we will apply a notional rate of return of 10 per cent on any capital sum over £6,000 disregard but £10,000 for people in residential care or nursing homes. This means that 85 per cent of pensioners entitled to pension credit will see any income received from their savings ignored entirely. Ignoring the first £6,000 of savings also helps better-off pensioners; for example, only pensioners with capital above £12,000 will face effective assumed rates of return greater than 5 per cent.
	The noble Lord's amendments then consider the treatment of ISAs and PEPs. I believe that in tabling these amendments the noble Lord intended that actual income and capital gains from PEPs and ISAs should be disregarded in the pension credit income and capital assessments. Achieving such an aim would make the administration of pension credit extremely difficult. For example, we would have to find a way to distinguish the proportion of a person's fund made up of interest and capital growth and how we broke it down between the two.
	In addition, I believe that the suggested policy would result in complex incentive effects. PEPs and ISAs would become a more attractive investment vehicle, and in addition to distorting the financial products market, it would also make it extremely difficult for financial advisers to give clear information and advice.
	The fundamental difficulty with the proposed amendments is that the Bill, as drafted, already takes no account of actual income or capital gains from PEPs and ISAs, as I have mentioned. We are only proposing to apply a notional tariff sum of 10 per cent to capital sums over £6,000. Thus the only practical way to implement Amendments Nos. 73 and 82 within the structure of a pension credit would be to disregard the whole amount of capital held in a PEP or ISA; in other words, to set the notional rate of return to zero for those savings products. As a result, capital held in ISAs and PEPs would thus be treated more favourably than savings in other vehicles.
	Amendments Nos. 73 and 82, therefore, have the same practical effect as the noble Lord's final amendment on this topic. Amendment No. 83 proposes a complete disregard of capital held in a PEP or ISA in the pension credit income assessment. They would all have significant effects on both the cost of the pension credit package and on wider incentives to save in various vehicles.
	Any of these amendments would result in a large initial cost in the region of £300 million, with many pensioners with capital held in PEPs and ISAs becoming entitled to pension credit for the first time. In addition, many pensioners with capital held in different vehicles would probably respond to this policy by moving their savings into a PEP or ISA.
	Eventually, the noble Lord's amendments would thus amount to a near total disregard of all capital in the pension credit income assessment at a cost of about £1 billion per year. Moreover, the incentive to save in a pension for those who expected to be eligible for pension credit would be eroded.
	We developed the provisions in Clause 15 after listening to both Age Concern, which told us that pensioners did not want the hassle of recording actual income from capital and would prefer a notional rate of return, and the Financial Services Authority, which advised that a 10 per cent rate of return enables it to give clear advice to savers about the benefits of second pensions.
	Therefore, I hope that Members of the Committee opposite accept that by ring-fencing ISAs and PEPs as they suggest would not only produce very substantial costs but also deform the patterns of saving in the future. In the light of what I have said, I hope that the noble Lord will not seek to pursue the amendments.

Lord Higgins: I am not sure whether the Chancellor of the Exchequer has read the speech which the noble Baroness has just made. She said that if the amendment was accepted PEPs and ISAs would be given more favourable treatment than other forms of saving. That is the whole point about PEPs and ISAs: they are given more favourable treatment than other forms of saving. That is one of the reasons why we thought it appropriate to raise this point.
	The noble Baroness said that in addition people will move their savings into PEPs and ISAs. If it is worth while to do so, they would have done so anyway. There would not be any change as far as this issue is concerned. Perhaps the noble Baroness can rebut that.
	I understand the point she made as regards costs. We on this side of the House must take that into account. As regards the capital value of a PEP or ISA, I am not sure whether it is going to be the original amount put into the PEP or ISA or whether it is to be their value at this moment or whenever the Act comes into operation. If someone put £3,000 into an individual company PEP five years ago, and the value of that has decreased to, say, 50p, will he still be judged under the Bill to have capital of £3,000 when the actual value of his asset is 50p? That would be grossly unfair.

Baroness Hollis of Heigham: If I am wrong about this I shall obviously write to the noble Lord, but my understanding is that when income is assessed, the value of PEPs, ISAs and other forms of capital will be taken at that point to produce a notional income. If there were to be a bust equivalent to that of the technology funds and the capital value fell and as a result notional income became exaggerated, pensioners would have the right to have the assumed or putative income for those purposes reconsidered. We debated that earlier. In other words, the five-year period will apply. At the end of that five-year period, we can consider what income is being deemed.

Lord Higgins: But we are starting at the beginning of the five-year period. Let me put my example simply. Five years ago, someone had invested £3,000 in a single company PEP. Let us say that the value of that PEP is now 50p. Which capital value is to be taken into account for the purposes of the Bill?

Baroness Hollis of Heigham: As I said, 50p. In other words, at the point at which the snapshot is taken, the income is taken into account. Then, five years later, it is revisited. If at any time pensioners feel that it is to their financial advantage to report circumstances and to have their pension recalculated, they can.

Lord Higgins: That is a helpful and clear answer. As to the broader issue, I am impressed by the argument about cost, which, on the other side of the coin, merely reflect the loss to the individuals concerned. In the light of that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Higgins: moved Amendment No. 74:
	Page 9, line 7, leave out paragraph (a).

Lord Higgins: This amendment is not as well focused—in the jargon—as it perhaps might be. It refers to Clause 15, which states:
	"In this Act, 'income' means income of any of the following descriptions".
	Paragraph (a), to which the amendment relates, refers to earnings. Let me give an example. An individual who falls within the scope of the Bill, being at a fairly low level of income and wealth, decides to take a job as a supermarket checkout assistant. Depending on how many days and hours he works, he may receive a very low remuneration. Pensioners may decide to try to make up their meagre income by taking up some form of employment—not full-time employment, but limited employment such as I have described. It would be unfortunate if they were deterred from seeking to better their circumstances by their own means because they would be clobbered for doing so. I should be grateful if the noble Baroness would tell us how she envisages low earnings being treated under the Bill. I beg to move.

Baroness Turner of Camden: I rise to speak to Amendment No. 95, which is grouped with Amendment No. 74. The amendment again concerns earnings, which we discussed in Committee last week. The amendment tabled in my name and that of my noble friend Lady Castle would insert the words:
	"£40 of a person's earnings in any week, or the whole of his earnings if less than £40, shall be disregarded".
	That embodies a proposal made by the National Pensioners Convention in evidence to the House of Commons Select Committee on Work and Pensions in which it told the committee that the present £5 earnings disregard is much too small to constitute an incentive to seek or accept part-time employment. Rather than including earnings in the types of income qualifying for the 60 per cent disregard, it would be simpler and more effective to retain a separate earnings disregard but raise it to a level—say, the £40 mentioned in the amendment—that would in most cases allow a day or so's work without any loss of benefit. In that way, part-time earnings could have a significant impact on pensioner poverty, if only in a minority of cases.
	Last week, my noble friend the Minister told us that the Government were considering earnings anyway, and that they accept that it is a good idea for people to work when they can for as long as they can—doing light work, part-time work, and so on. I think that most people—particularly in this House—would acknowledge that work keeps people healthier and more in touch with others. It prevents social exclusion, which we know is often a problem for pensioners who are left in a single state. Where they can, people should be encouraged to do some sort of work in retirement. Even if it does not bring in much money, it is good from a social point of view. I therefore hope that my noble friend will be prepared to look with favour on the proposition in the amendment when the whole issue of earnings is under consideration.

Lord Addington: It is very odd when one has to wait this long to make a first intervention on a Bill, having listened to so much of the debate, to discover that virtually everything that one wanted to say about an amendment has already been said. My name is attached to the amendment moved by the noble Lord, Lord Higgins, for the simple reason that those falling within the scope of the Bill will not be earning much money. Surely, they should benefit in that way. The point made by the noble Baroness, Lady Turner, about social interaction and not letting people think that they are totally switched off and left on the shelf is absolutely valid. Social interaction is an important part of everyone's life; we are a social animal and we need it. In our society, work is the basis of most forms of social interaction. That is a fact. I entirely endorse that point.
	We are not talking about vast sums of money. We are probably talking about the national minimum wage across the board. We should include in the Bill—or at least at the first available opportunity—a provision to allow earnings. I cannot see how we would do anything other than benefit from that.

Baroness Hollis of Heigham: I welcome—I think, although perhaps I should phrase that differently—the opportunity to debate Amendments Nos. 74 and 95, which concern the treatment of earnings in pension credit. The amendments would change Clause 15 of the Bill, which details the sources of income and capital that can be included in the income assessment.
	The amendment tabled by the noble Lord, Lord Higgins, Amendment No. 74, would remove earnings from our interpretation of income. That means that earnings would not figure in the income assessment of any pension credit claimant aged 60 or over. Earnings of their partners—of any age—would also not figure. The noble Lord, Lord Addington, said that that would not cost much. I have news for him. It would cost nearly £2.5 billion—more than the cost of the current pension credit proposed in the Bill. We have designed pension credit to match the personal needs of pensioners. We can do that only if we take into account pensioners' own resources. In the Bill, we have made arrangements that some of those resources can, in part or in full, be set aside for several different reasons.
	I shall go into the substance of the matter. Some 800,000 pensioners work beyond state pension age. I agree with the noble Lord, Lord Addington, and my noble friend Lady Turner of Camden that if people can do so, it is welcome and desirable. Many of those people, of course, would not qualify for pension credit, regardless of how we treated earnings in the income assessment, as they will have second pensions and capital to put them well out of the bounds of our ambitions. However, many others working part-time—the noble Lord, Lord Higgins, gave the example of someone working part-time in Tesco—will be entitled to pension credit.
	We want to have a debate on earnings, but we did not have it in mind to ignore the earnings of 60 to 64 year- olds, which would be embraced by the noble Lord's amendment. Although many in that group—and older people too—work or aspire to work, the working tax credit is better suited to complementing their needs than the pension credit. As we say in our response to the consultation yellow booklet, there are a range of small earnings disregards in the Minimum Income Guarantee. If we brought those forward into the pension credit, we would have four possible disregards, ranging from £5 a week for a single pensioner to £25 a week, say, for a single pensioner responsible for a child.
	We want to consider how best to treat earnings in the context of those disregards and how best to ensure that pension credit contributes to the active ageing agenda. That is why I welcome the opportunity to refer to the amendment tabled by my noble friend Lady Turner of Camden. The amendment would introduce a £40 disregard of earnings into pension credit. As my noble friend said, that is roughly equivalent to a day's work at the minimum wage. I can understand her aim. However, as the amendment stands, the disregard would apply to all people aged 60 and over and would cost nearly £200 million a year to implement.
	I am sorry that I cannot produce a more explicit statement of our policy. It is an extremely complicated matter, and we are still working through the implications of the interlocking between the working tax credit and the pension credit. I assure my noble friend and noble Lords on the Opposition Benches that we are considering how the pension credit and earnings disregards will link in with the new working tax credit for younger pensioners. We are considering what arrangements are best suited to rewarding and promoting our ambitions for active ageing for older pensioners who do work.
	Given the costs involved—they could be exceedingly large if we took the amendment at face value—and the extent to which older workers would be drawn into a scheme designed for pensioners, I ask the noble Lord to withdraw the amendment.

Lord Higgins: As I said, my amendment is not well focused, as it knocks out earnings altogether. I can understand that, if we were to accept it, it would be extremely expensive. None the less, the points made by noble Lords who have spoken are important.
	Can I make clear what the Minister is saying? As I understand it, she is saying that it is a complicated business—none of us would dispute that—and that there may be a particular situation for pensioners aged between 60 and 65. Above that level, can we be clear that it is the Government's intention that there should be a disregard? As I understand it, there is anyway an MIG disregard. I think that it is £15 a week for full-timers and part-timers working more than 16 hours or, in the case of a couple, 24 hours a week. I have had terrible trouble trying to find where it appears; I presume that it is in a statutory instrument, but I could not discover where.
	At all events, what we are considering has two elements: the state pension consists of what used to be MIG, on the one hand, and the savings credit, on the other. Am I right to interpret the Minister as saying that there would certainly be a continuation of the MIG disregard for pensioners above 65, let us say, and that the Government are still considering whether to give a disregard as far as concerns the savings credit for people who are also in part-time work. I am not really clear at the moment what the Minister is saying.

Baroness Hollis of Heigham: I understand the noble Lord's point about earnings disregards. Let me clarify the current situation; the noble Lord may not have described it completely.
	At the moment, the earnings disregard in general applies to all client groups in receipt of income-related benefits. The different levels of earnings disregard are as follows, and they apply across the board: £5 for a single person; £10 for a couple; and £20 for lone parents, disabled people entitled to the disability premium or aged over 60, carers entitled to the carers' premium and people in certain special occupations. The £25 earnings disregard comes into play with housing benefit and council tax benefit. If the noble Lord were to say to me that we should tidy it all up, I would not disagree. However, that is where we are. In addition, there is, of course, help with childcare costs coming through from the Tax Credits Bill. That is the current state of earnings disregards.
	I do not want to make a commitment at this stage. I hope that the noble Lord, Lord Higgins, will bear with me; I can understand his irritation. We should not at this point separate the treatment of earnings from earnings disregards. We seek to have a clear position for those aged over 65. There is an order of difficulty relating to those between the ages of 60 and 65 and people under the age of 60. That is a complex matter that we must resolve.
	Certainly, if there is an earnings disregard of any size, we must consider how it interlinks with disregarding earnings in total. If I were to say, for example, that we would keep a minimum of £5 or £10, it might be unnecessary if the subsequent earnings were to be disregarded in total for these purposes. I ask the noble Lord to allow me to return as soon as I can with a clear statement of our proposals, rather than chip away at bits of them. There are two or three different considerations at play. To be frank, I must say that I cannot answer the noble Lord's questions unless I have clearer policy parameters than I have at the moment. They are still being consulted on and worked up for reasons that he will understand.

Lord Higgins: I fear that I do understand them. The whole thing is incredibly complicated, which is a result of the Chancellor of the Exchequer's obsession with the whole idea of credits. At the point at which the Minister is not sure whether she has got it right, I really become terrified—for most of the last speech, in fact.

Baroness Hollis of Heigham: I believe that my description of earnings disregards was accurate. I said that I could not give the noble Lord the policy parameters on whether the disregards should be increased so that it was a full earnings disregard for those over 60 up to those who remain below the pension credit ceiling and, secondly, on the interlock between those under 60, those between 60 and 65 and those over 65.
	The problem is the determination of policy parameters. Once we have done that, the rest will fall into place. The noble Lord will understand perfectly what can then be deduced. If I said, for example, that all earnings were to be disregarded or, alternatively, that all earnings were to be qualifying income, the noble Lord and I could agree on the policy implications for pension credit. I cannot do that at the moment.

Lord Higgins: That is unsatisfactory. Can the Minister clarify two points? First, in the course of this consideration, is she considering disregards in respect of both parts of the state pension credit? Secondly, should we not have, by Report, a clearer answer than she has been able to give this evening?

Baroness Hollis of Heigham: I very much hope that I will be able to give a clearer answer by Report. If I cannot, I shall apologise to the noble Lord.

Lord Higgins: We shall wait and see what happens. If necessary, we shall vote on it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Higgins: moved Amendment No. 75:
	Page 9, line 10, leave out paragraph (d).

Lord Higgins: The amendment would remove paragraph (d), which—I think I am right in saying—is related to annuities. It is a question of whether income from annuity contracts other than retirement pension income should be included in income as far as concerns the operation of the state pension credit. It appears to be the Government's intention that income from an annuity should count as income. But what puzzles me is the parenthesis which states,
	"(other than retirement pension income)".
	It would appear therefore that income from a retirement pension income annuity, typical in the case of defined contribution pension schemes, is not to be counted as income. However, if someone has an annuity contract which has nothing to do with their retirement pension income, then it is to be treated as income. That is what the wording states, but it strikes me as rather extraordinary. Perhaps the noble Baroness can explain. I beg to move.

Baroness Hollis of Heigham: Amendment No 75 is another in the series dealing with income. Subsection (1)(d), which the amendment seeks to remove, provides the power to take income from annuity contracts, other than retirement pension income, into account when calculating pension credit entitlement.
	Annuities are treated as income within MIG whether they are purchased from a pension fund or other capital. The Government intend to carry forward these provisions into those for pension credit. Therefore income from annuities will be taken into account as a weekly income stream in the calculation of the guarantee credit. The weekly amount will also be used to calculate the savings credit.
	We have included this provision because, so far as possible we wish to maintain a level playing field between different retirement savings products, a point we have discussed on earlier amendments. We do not want to make some savings vehicles more financially attractive, nor do we want to encourage people to transfer capital holdings into an annuity contract in order to obtain a larger amount of pension credit or, indeed, to become newly entitled to it.
	I hope that I have been able to persuade the noble Lord of the need to take income from annuities into account and I trust that he will feel able to withdraw his amendment.

Lord Higgins: I understand the Minister's response perfectly well, but then the parenthesis,
	"income from annuity contracts (other than retirement pension income)"
	should not be taken into account. As presently worded, it looks as though annuity retirement pension income is not to be taken into account. I am not clear why that should be the case.

Baroness Hollis of Heigham: All I can say is that income from annuity contracts other than retirement pension income covers a list of incomes other than retirement pension. I understand that this paragraph specifies the additional forms. Retirement pension is covered in Clause 15(1)(c), which is defined in Clause 16, and includes in paragraph (h) retirement annuity contracts. I think that this is simply in addition to the retirement pension income that we have been discussing.

Lord Higgins: I fear that I may have slightly misled the Committee on this point.

Baroness Hollis of Heigham: I certainly undertake to write to the noble Lord if he requires a more detailed explanation.

Lord Higgins: I may not have expressed my point as clearly as I might have done because, as has just been pointed out by my noble friend, paragraph (c) lists "retirement pension income". In that case, I am even more puzzled. If paragraph (c) covers retirement pension income, why do we then need the parenthesis under paragraph (d)?

Baroness Hollis of Heigham: I understand that it is possible to turn moneys into an annuity which may have no formal or technical connection with retirement pension, although it may then be enjoyed by someone of retirement age. That, I presume, is why it has been specified in this way.

Lord Higgins: I shall need to think about the matter. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Higgins: had given notice of his intention to move Amendment No. 76:
	Page 9, line 11, leave out paragraph (e).

Lord Higgins: This amendment seeks to leave out paragraph (e). I apologise to the Committee. I do not wish to move the amendment.

[Amendment No. 76 not moved.]
	[Amendment No. 77 not moved.]

Lord Higgins: moved Amendment No. 78:
	Page 9, line 14, leave out paragraph (g).

Lord Higgins: I have been in this game for a long while. This is the more serious amendment.
	The amendment seeks to leave out paragraph (g) which may be an important matter. It suggests that,
	"a war disablement pension or war widow's or widower's pension"—
	matters which usually raise serious concerns in the Chamber—apparently should be included as part of the income taken into account for the purpose of this legislation. Is that typically the case; namely, that such items are always included in income over all the elements of social security legislation, or is this in any way unusual? I beg to move.

Baroness Hollis of Heigham: The amendment asks us to disregard war disablement, war widow's and war widower's pensions for the purpose of calculating entitlement to pension credit.
	However, I do not think that it would be right to calculate the amount of guarantee credit someone needs, or to reward pensioners for having saved, without basing entitlement on the amount of income already available to the pensioner. This amendment proposes to do that. It means that pension credit would be paid in addition to a war pension.
	It is true that we do disregard some forms of income, such as attendance allowance. That is done because such payments are intended to meet exceptional needs or circumstances. For example, attendance allowance is paid to cover the extra costs of disability needs, not as an income replacement.
	I wish to set out a worked example which I shall give with the usual qualification. If I am wrong, I shall come back to the noble Lord on the point. Let us take a war widow or war widower with a retirement pension of £77, and the average war widow or widower's pension of £175, which would total £252. Housing benefit and council tax benefit would be worth, say, £70 and could be disregarded, thus the income would be £322, tax free. If we were to accept the noble Lord's amendment, we would assume for the purposes of pension credit that the income was not £322 tax free, but rather a retirement pension of only £77, which would entitle the claimant to MIG totalling £23. I am sure that that is not what the noble Lord would wish. In no sense could that be regarded as targeting help for those who most need it.
	Furthermore, the amendment would add to costs at a rate of around £250 million per year. We take the view that that would not be a reasonable use of public money, to say nothing of the proper treatment of war pensioners, war widows and war widowers. They are properly recompensed in the benefits they currently claim. To ignore those for the purposes of the amendment would be to assume an entitlement to MIG—the difference between £77 and £100—in pension credit. However, I do not think that incomes at the level to which I have just referred could possibly justify such a proposal.

Lord Higgins: I know that concerns have been expressed with regard to this point. It is helpful that the Government's view has now been put on the record. I shall need to consider it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 79 and 80 not moved.]

Baroness Noakes: moved Amendment No. 81:
	Page 9, line 18, leave out paragraph (j).

Baroness Noakes: This is the last of a series of probing amendments looking at the elements of income specified in Clause 15(1). Paragraph (j) states,
	"income of any prescribed description".
	The amendment seeks to delete the paragraph from subsection (1). The Explanatory Notes state that the paragraph would be used to bring in items such as employers' sick pay, matrimonial maintenance payments and could also be used to take into account "new types of income". I hope that the noble Baroness will forgive me for pointing out that if she had an income tax definition, then she would not have to worry about prescribing additional items because those would automatically come into account, including, I suspect, new forms of income.
	Perhaps I may concentrate on the element referred to as "new forms of income". Given her experience of other means-tested benefits, can the noble Baroness tell the Committee how often similar powers to specify new types of income have been used in the past; that is, why such a power is required by the Secretary of State? I beg to move.

Baroness Hollis of Heigham: I do not have a clue how often that particular phrase has been used. The noble Baroness is absolutely right—

Baroness Noakes: I thank the Minister. I wish to ascertain how often, having taken the power, it has been used.

Baroness Hollis of Heigham: The noble Baroness has rightly identified that a small number of older people have other forms of income. She cited employers' sick pay and matrimonial maintenance payments. We could, of course, seek to detail all possible income streams currently available in retirement within the State Pension Credit Bill and its regulations, but an element of "future-proofing" is always necessary to ensure that legislation is capable of being reasonably robust. It is a protection, a competence to embrace the new financial products which are continuously being developed and introduced to the market. It is for that purpose that we need this additional power.
	I wish that I could give the noble Baroness a worked example. I try to do so when I can, but I cannot. But, for example, there has been much discussion in the press recently in regard to David Curry's Bill and new forms of financial products. We have to make sure that, where appropriate, any such development of new products is encompassed within the Bill. This gives us that flexibility.
	I see no reason to believe that that power would be applied inappropriately. I cannot give the noble Baroness a worked example, but, in the future, should such a new scheme be devised, it would, where appropriate, fall within the framework of Clause 15.

Baroness Noakes: I thank the Minister for that explanation. I think I understand what she said. We should express some concern that "future-proofing" incorporates an ability completely to rewrite the rules for ever and a day without bringing them back for discussion. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 82 and 83 not moved.]

Baroness Noakes: moved Amendment No. 84:
	Page 9, line 18, at end insert—
	"( ) For the purposes of this Act a person's earnings shall not include anything which would be chargeable to income tax under Schedule E to section 19 of the Income and Corporation Taxes Act 1988 (c. 1) (schedule E) but for the operation of Schedule 8 to the Finance Act 2000 (c. 17) (employee share ownership plans)."

Baroness Noakes: In moving Amendment No. 84, I shall speak also to Amendment No. 85. We have been through many examples of income which are or are not caught under Clause 15(1). Amendments Nos. 84 and 85 deal with the treatment of gains under employee share schemes.
	I should point out that the drafting of the amendments leaves something to be desired. Both amendments refer to "Schedule E to section 19" of ICTA 1988, but they should refer to "Schedule E for the purposes of section 19". I hope that the Committee was not confused by this when reading the amendments.
	The basic income tax rule—I am simplifying hugely—is that gains on employee share schemes are taxed as income unless there is a specific exemption. Of course, there are many exemptions as successive governments have encouraged employee equity involvement. The concern that these amendments address is whether the Department for Work and Pensions intends to treat such gains as income for pension credit purposes.
	There are specific exemptions from income tax charges for employee share ownership plans—known as ESOPs—under the Finance Act 2000. Amendment No. 84 seeks to ensure that gains made by employees under ESOPs are not treated as income for pension credit purposes. ESOPs are designed to allow employees to build equity stakes—often modest ones—in their employers. The policy of successive governments has been to encourage this. I hope that the pension credit will not bring such gains within its net.
	Amendment No. 85 is broader and covers all types of employee share schemes, including both unapproved and approved share option schemes, as well as ESOPs. Again, I hope that the Government will wish to continue to encourage employee involvement in their employers through direct share ownership and that they will not seek to treat the gains realised thereby as income for pension credit purposes.
	I imagine that for many pensioners the issue of gains from such share rights will arise only when they are fairly near retirement, although many schemes have qualifying periods which could put such gains well into retirement age. So it is not an issue that could arise only once for a pensioner.
	I know that the Government have been encouraging share ownership by employees and I hope that the Minister will look kindly on these amendments. I beg to move.

Baroness Hollis of Heigham: Amendments Nos. 84 and 85 are linked in that they propose that earnings taken into account for pension credit purposes are net of income arising from employee share schemes. As I understand it, the first amendment proposes that earnings that are deducted from salary to invest in an employer's share incentive plan should not show up as earnings in pension credit and therefore should be disregarded in the income assessment. Similarly, the value of free and matching shares received under the plan should be disregarded. Again as I understand it, the second amendment proposes that any gain from employees' share schemes that are treated as earnings should be disregarded as income in the pension credit income assessment.
	As the Committee will know, the Government fully support the widening of employee share ownership. Such schemes can only help to increase productivity. Our commitment is clearly demonstrated by the introduction of the two new tax-advantaged schemes in the Finance Bill 2000, which was mentioned by the noble Baroness. Both are very generous.
	The share incentive plan—previously known, as the noble Baroness described it, as ESOP—is aimed at promoting shareholding among all employees in order to increase productivity and improve long-term performance. The share incentive scheme allows a company to bring its employees into share ownership in three ways. It can give its employees up to £3,000 of free shares annually, free of income tax and NICs; employees can contribute up to £1,500 per year out of pre-tax and NICs pay to buy "partnership shares"; and the company can award up to two matching shares for each partnership share bought.
	At the same time as we introduced the share incentive plan, we introduced the enterprise management incentives aimed at helping smaller, high-risk companies to grow and become successful. This was enhanced on 1st January this year so that more companies could provide tax-advantaged share options to their employees.
	The noble Baroness asks us to follow the example of the Inland Revenue and effectively to make contributions to a share incentive plan non-taxable or, in our terms, to disregard them. But she then asks us in the second amendment to steal a march on the Inland Revenue. I am sure such a thought never occurred to the noble Baroness, but she asks us to disregard any gains from employee share schemes should they be paid as earnings. As things stand, such gains, if considered as earnings, are liable to tax in the same way as any other earnings.
	My department uses for its definition of "earnings" the same definition as that used to determine liability for NICs. I am pleased to tell the Committee that, as neither contributions by employees to share incentive plans, nor the value of free and matching shares received under those plans, are subject to income tax or are liable for NICs, it follows that this income will be disregarded in the definition of earnings for pension credit purposes.
	Turning to the next point, the noble Baroness asks us to disregard in our definition of "earnings" any benefits received by employees from employee share schemes that have the general character of earnings from employment. These benefits are subject to tax and NICs in the normal way. I am sure that the noble Baroness will understand that creating such a disregard in a benefit designed to suit the needs of pensioners with low and modest incomes when the Inland Revenue has no such exception for tax and NICs purposes—although many of the noble Baroness's arguments have been based on analogies, she is now asking to diverge from them—would, at best, be inappropriate.
	Given that we have achieved the purpose intended by Amendment No. 84 and given our understandable reluctance to break new ground on Amendment No. 85, I hope that the noble Baroness will feel able to withdraw her amendment.

Baroness Noakes: I thank the Minister for that reply. I shall read carefully what she said in respect of Amendment No. 84. These are complex matters and I shall reflect further on whether I understand exactly what she said.
	Amendment No. 85 goes beyond the narrow examples given in the Finance Act 2000. I accept that, as drafted, it may seem particularly broad, but there will be cases of gains being made by retired employees under approved share option schemes. These will not be regarded as within the charge to income tax because of the exemptions—their share options fall out of the charge to income tax although they fall into the charge of capital gains tax—but I am not clear whether the noble Baroness intends those kinds of gains to be treated as income. I am unclear as to whether or not we have tied up every point.
	I accept the Minister's mild rebuke about stealing a march on the Inland Revenue, but I am not sure that the core of Amendment No. 85 has been dealt with correctly.

Baroness Hollis of Heigham: This is very complex. I could speculate, but it might be wiser—it certainly would be safer—for me to write to the noble Baroness. If she is dissatisfied, she can press me on Report.

Baroness Noakes: I am grateful. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 85 not moved.]

Lord Davies of Oldham: I beg to move that the House do now resume. In moving the Motion, perhaps I may suggest that the Committee stage begins again not before 8.30 p.m.

Moved accordingly, and, on Question, Motion agreed to.
	House resumed.

Immigration and Asylum Appeals (Procedure) (Amendment) Rules 2001

Lord Avebury: rose to move, That an humble Address be presented to Her Majesty praying that the rules, laid before the House on 17th December 2001, be annulled (S.I. 2001/4014).

Lord Avebury: My Lords, these rules have aroused an enormous amount of concern throughout the whole refugee community from the United Nations High Commissioner for Refugees down to all those who are trying to help asylum seekers in the United Kingdom.
	The rules apply to an asylum seeker whose claim is certified by the Secretary of State under Section 9(1) of the Immigration and Asylum Act 1999. He is caught under several different headings: if he fails to produce a valid passport at the port of entry and gives no reasonable explanation for that failure, whether or not an explanation exists; if he produces an invalid passport and does not inform the officer that it is invalid; if he enters the UK for some other purpose and claims asylum only after the original leave to remain has expired; if an immigration officer decides that he does not have a well-founded fear of persecution or a right under the European Convention on Human Rights; if his case is manifestly fraudulent or any of the evidence that he presents is false; and so on.
	In any of those circumstances, the Secretary of State may certify the case under Schedule 4 to the 1999 Act. Under the rules, the adjudicator's determination will be served only on the Secretary of State who will then notify the appellant or his representative. If an asylum seeker who is not certified applies to the tribunal for leave to appeal, and the tribunal refuses such leave, the decision will be sent to the Secretary of State who will forward it to the applicant and his representative at a time of his own choosing.
	No time limit is laid down within which the Secretary of State has to forward the decision in either case, presumably so that he has plenty of time to formulate removal directions and serve them on the appellant at the same time as he receives the adjudicator's or tribunal's decision, thus allowing him to be taken into custody immediately. Will the Minister confirm that that is how the procedure will operate? It is not clear from the rules or the press release, which was issued by the Minister's department.
	A solicitor sent me an e-mail to ask:
	"Where is the impartiality and fairness of a judicial system which gives its decisions to one party only, for its own administrative convenience?".
	The noble Baroness will be aware that the Law Society is critical of both the absence of a time limit, which it says is
	"extremely prejudicial to the appellant"
	and of the simultaneous delivery of the adjudicator's decision and the removal directions, which could nullify legitimate legal remedy against removal.
	The Immigration Law Practitioners' Association says that it is aware of no other area of litigation where one party has no right to be told direct by the court or tribunal whether or not he has been successful. The Refugee Legal Centre makes the same point.
	Why did the Government make that change to the rules? It was not proposed in the consultation paper on appeals which was issued last summer; it was sneaked in over the Christmas Recess, which suggests that the Government want to minimise discussion. The Home Secretary's press release states that it is to prevent asylum seekers from
	"having a head start in knowing what the decision is, and if it is unfavourable, being able to disappear".
	He added that it would contribute to
	"getting a grip of the removals process, and will ensure that those who, having exhausted the appeals system, have no right to remain, actually do leave the country".
	In other words, snatch squads will descend on appellants, bundling them and their families off to Harmondsworth or Tinsley House before they are even aware of the adjudicator's decision. They will have no chance to obtain legal advice on whether it might be possible to seek judicial review of the decision. I asked the Government how many asylum seekers who had exhausted their rights of appeal last year obtained leave to seek judicial review. That question has not yet been answered, but there are many such cases. No statistics are kept, and I hope that the Minister will say on what information the Government decided that it was necessary to introduce the rules separately from other reforms being made to the appeals system.
	Will everybody who is certified and loses at the adjudicator or tribunal stage be detained? How long will such people be detained? If the time is short, they may not have time to consult their lawyers. If the time is long, that will be against the Government's declared policy of keeping people in custody for the minimum length of time.
	There may be people who, although they have no legal right to remain, deserve consideration on humanitarian grounds. An example is the ethnic Albanian family on whose behalf it was argued in the High Court that because the wife had been raped in public, it was unreasonable to expect the family to return to Kosovo. The adjudicator said that the family's ordeal was the worst case he had heard in four years of experience. Mr Justice Turner, while refusing leave to appeal, suggested that an application should be made to the Secretary of State to exercise his discretion to allow the family to remain here indefinitely.
	Had these rules applied, the case would probably not have reached the High Court. The chief executive of the Immigration Advisory Service, Mr Keith Best, has written to the Home Secretary saying that if removal directions are indeed served at the same time as the decision, rights that the appellant might still have will be nullified. Mr Best contradicts the Government's assertion that in every case where the rules apply, the appellant will have exhausted all further rights of appeal.
	Mr Best also thinks that there could be a right of appeal in certain circumstances, such as when the spouse or child of the appellant, having a separate locus under Section 6 of the Human Rights Act 1998, invokes the right to family life provision of Article 8 of the convention. Let us suppose, for instance, that the spouse has a serious accident after the hearing and needs indefinite care and treatment. It might then be unreasonable to expect the spouse to accompany the applicant back to the country of origin—a third world country, where no medical facilities or support exists for the severely disabled. That spouse might then be able to invoke Article 8. It is therefore not true that all the appellant's rights have been exhausted.
	The UNHCR deputy representative says that judicial review may be
	"the only channel by which the applicant may realise his entitlement to international protection",
	for example, when relevant country of origin information is disregarded or not adequately reflected in the decision to refuse asylum.
	He could have been referring to the recent experience that we had with Zimbabweans when the Minister was asked repeatedly to review cases that had already been decided, in the light of the crescendo of human rights' abuses in Zimbabwe as the election approaches. The Minister adamantly refused to consider our proposal and the individuals concerned would have had to rely on judicial review where that was possible, until suddenly one day the Secretary of State decided after all that it was unsafe to send anybody back to Zimbabwe.
	In about half of the cases dealt with by the RLC since the 1999 Act came into force, the certificates have been overturned. Other agencies may not have had the same rate of success, and it must be acknowledged that the quality of representation is variable. When appellants are dispersed they may not be represented at all because of the difficulties of communication. The existing solicitor may give up the case when the client moves because of the distances involved, and it may be impossible to find a replacement in time. Thus it will be a matter of luck whether an asylum seeker is dealt with by the procedure of the order. For example, the IND habitually certifies eastern European Roma cases as manifestly unfounded, despite the huge amount of material on the violation of Roma rights. When Roma clients are competently represented, the certificates are often successfully challenged.
	The people who abscond at the end of the asylum process present something of a problem. We would have agreed to discuss ways of reducing the number if the Government had decided to consult us, the voluntary agencies and the practitioners, as they normally do. First, we should like to know how long after the final decision the removal notice is generally served, and what proportion of notices cannot be served because, in the meanwhile, the person concerned has moved without giving any forwarding address. Secondly, can the Minister tell the House how many people leave voluntarily when asked to do so? From this Friday, all new asylum applicants are to be issued with smart cards, as announced by the Home Secretary on 29th October last year. Will people who fail to report have their benefits suspended? Further, what will happen to the benefits of a person whose case is certified after an adverse decision is notified to the Secretary of State by the adjudicator?
	These rules were produced quite separately from all other changes in the appeals system. They were not foreshadowed in the consultation paper issued last summer; they were sneaked in over the Christmas Recess. They deprive some asylum seekers and their representatives of the right to seek judicial review in circumstances where it has proved to be a necessary safeguard. I beg to move.
	Moved, That an humble Address be presented to Her Majesty praying that the rules, laid before the House on 17th December 2001, be annulled (S.I. 2001/4014).—(Lord Avebury.)

Lord Judd: My Lords, I am sure that the House will be grateful to the noble Lord, Lord Avebury, for having raised the issue this evening. The noble Lord has a long, distinguished, and perhaps unrivalled career and history of commitment on these issues. He put the case with great clarity and gave the House a considerable amount of detail on the subject. It is, therefore, unnecessary for other speakers to repeat that ground. I should simply like to make a few brief points.
	First, I should like to assure my noble friend the Minister that concern is not limited to noble Lords on the Benches opposite. There is concern on these Benches. We are aware of the more widespread anxiety among the people to whom the noble Lord, Lord Avebury, referred. I shall begin with one of the points that has been raised with me and one upon which it would be interesting to hear my friend's comments. The arrangements have already been put into practice before the time for challenging them has reached anything like a deadline. This is perceived as being unfortunate.
	The second issue is one that has caused a good deal of consternation. In this very highly-charged area in terms of human well-being, emotions, psychological strain, and so on, it is important to have a very good relationship among the different people playing their part. I have in mind the legal profession, the advisers, the courts, the Government; and, indeed, the officials who have to carry out whatever may have been decided. Therefore, consultation and goodwill is crucial to achieving a civilised approach. Again, it would be helpful to hear from my noble friend why she believes there is so much feeling that there has not been anything like adequate consultation on what is obviously a very significant arrangement. I think that this is most unfortunate. I hope that my noble friend will find some way of reassuring us on this point tonight.
	I have one further, simple point to make. When dealing with asylum, we are dealing with what is perhaps one of the most crucial issues in the whole realm of human rights. It is terribly important that justice not only be done, but that it should be seen to be done. However, to the best of our capabilities, we must also be confident about the decisions that are made. When this House debated the death penalty in the past, one of the issues quite properly raised was that of a mistake being made where capital punishment exists, with the impossibility of putting it right.
	As someone who has for much of his life worked in realms not far from the issues under discussion this evening, I believe it is no exaggeration to say that, on occasion, we may be dealing with exactly such an issue. In that context, if there are any conceivable grounds whatever for challenging a decision—even at the 11th hour—and going over again what is involved in order to make absolutely certain that the rejection of a person's search for asylum is justified and right, it seems to me that that opportunity should be taken. It is, therefore, worrying that the new arrangements seem to some people to mean that irrevocable action may be taken before there has been a chance to exercise such a right. My noble friend's reassurance on those points would be most helpful.
	I know that dealing with the whole business of asylum and the issue of migration is a very difficult task. I have a good deal of sympathy with my noble friend as regards the responsibilities involved. I am sure that my noble friend must be exasperated on occasion. It seems that everyone wants it both ways: they want clarity; they want firmness in everyone's interests; but when one tries to introduce clarity and firmness, people want more deliberation and discussion. Of course, there is a balance to be struck. However, on this particular issue, there is a real feeling that the balance has come down too far in terms of administrative convenience, or perhaps something a little more—dare I use the word in all friendliness?—sinister than administrative convenience. It is extremely important, therefore, that my noble friend the Minister should put our minds at ease on these issues. It may well be difficult to do so, but I believe that she should try to reassure the House.
	The noble Lord, Lord Avebury, made one further important point—one that weighed heavily with me. If a matter is being handled judicially, surely it is the right of the person affected by the decision to feel confident that he is hearing from the judicial authorities as to why the decision has been made and what the possible implications may be. If there is to be an intervention by the executive, there will undoubtedly be anxieties and misgivings about what exactly is going on, and why. For all those reasons, I hope that my noble friend, who is a generous person, will agree that the noble Lord, Lord Avebury, was right to raise the issue, and that she will do her utmost to reassure people on these very deep and genuine anxieties.

The Countess of Mar: My Lords, I begin by declaring an interest in that I have been a member of the Immigration Appeal Tribunal for 16 years and have, therefore, seen the changes that have occurred with the number of asylum seekers increasing hugely over recent years. Although I do not always agree with the noble Lord, Lord Avebury, he has made some very valid points tonight. I am grateful to him for enabling me to add my pennyworth. I can understand the frustration of Her Majesty's Government. I sometimes feel despondent when I have given careful, anxious and thorough scrutiny to a case, as I am required to do, while I know that it will go nowhere.
	However, there are one or two fundamental questions. Can the Minister kindly tell the House how many attempted removals have been thwarted by the disappearance of the appellant in the past year? If, as I suspect, the number is not known, can the noble Baroness say what efforts have been made to quantify the problem that this piece of legislation is intended to remedy?
	We all know that there is plenty of anecdotal evidence that large numbers of failed asylum seekers remain in the United Kingdom without permission. We are aware that the number of voluntary and forced removals combined bears little resemblance to the number of appeal refusals. There is not much point in this little piece of legislation if it is not going to produce results.
	It is the duty of the Immigration Appeal Tribunal to apply the law as it is. This statutory instrument deals with an administrative process after the decision has been made. I am sure that the Minister understands that it does not affect the decision making process and that, while the staff of the Lord Chancellor's Department may be involved, the judiciary is not.
	I still have some concerns about the rules—some of which have been clearly expressed by the noble Lords, Lord Judd and Lord Avebury. We all know the adage that justice must not only be done; it must be seen to be done. The noble Lord, Lord Judd, expressed far more clearly than I can my unhappiness about the way in which the rules make arrangements for the determination of cases where appeals against refusals to recognise appellants as refugees have been dismissed or have been sent to the Secretary of State. That is not fair. No time limit is laid down between the date of receipt of the determination by the Secretary of State and the date before which it must be served upon the appellant. I understand that there is some kind of agreement between the Home Secretary and the noble and learned Lord the Lord Chancellor that, if a determination has not been served within two months, the Immigration Appeal Tribunal will serve it by post. I should be grateful if the noble Baroness would confirm that.
	There are a number of "What if?" questions that need to be answered. What will happen if a determination rejecting an appeal is served by Home Office officials whose function is also to arrange for the removal of the appellant, where there is a possibility that the appellant may have the right to further recourse to the courts? Are removal directions to be served with the determination? Will the appellant be taken into custody and given the opportunity to seek legal advice? Is the appellant's representative to be given the opportunity to be present when the notice is served? Is it the intention that the Home Office will employ additional staff to carry out this function? To put it mildly, the credibility rating of the Home Office in this field tends towards the low side, if not the very low side. If immigration officers are to do this job properly, they must be given the tools and the manpower.
	The noble Lord, Lord Judd, mentioned the lack of consultation. This has been a long-standing problem. Why is it suddenly being pushed in now? Has there been consultation, for example, with the Council on Tribunals? If there has, when did it take place and what was the process?
	Finally, I make this plea. When a law is brought into force, copies of the legislation must be publicly available. This has not been the case with these rules—and, more seriously, nor was it the case in the early days of the recent anti-terrorism Act. The Home Secretary had to be asked to produce a proof copy to the deputy president of the Immigration Appeal Tribunal so that he could set up a bail hearing for someone who had been arrested under the terms of the Act. He was told that he must not divulge the contents of the proof copy to anyone. That is not satisfactory. There needs to be co-ordination between the Stationery Office and the department producing the legislation, so that when an Act or a regulation comes into force it is publicly available.

Lord Hylton: My Lords, your Lordships might have some slight sympathy with the Government in their desire to speed up deportations of asylum seekers whose cases have failed. I might possibly share that sympathy to some extent. However, I do not think that sympathy is what we are being called on to express in this debate. The Government have to listen seriously to the Immigration Law Practitioners' Association, which has pointed out that these rules were produced without consultation. It goes on to say that they are wrong in principle and unworkable in practice.
	Some of us who have laboured through a whole series of immigration and asylum Bills have been saying for some time that what needs to be got right is the quality of the initial decision. Many components go into the quality of the initial decision. I shall mention only a few. One is the availability of interpreters for people who have no English or very limited English. An interpreter has to be the kind of person who can enter into the state of mind of an asylum seeker who may have travelled many hundreds of thousands of miles to get here.
	Another important factor is the quality of the background information on the country of origin of the person in question. For example, what are, in practice, the risks of torture if that person is returned to where he started from?
	A third, highly important factor is the availability of legal advice to the applicant. Applicants cannot be assumed to understand British law, let alone the workings and practice of the British immigration and asylum process. The rules assume that the applicant may not have a legal adviser. Even if he is fortunate enough to have one, he may be removed so quickly that he will not have access to deal with the latest refusal.
	I agree entirely with the noble Lord, Lord Avebury, that the rules are likely to have a serious effect on those cases where emergency leave to remain is normally granted. Perhaps I may quote a comment by the London representative of the UN High Commissioner. He points out that it is essential to,
	"determine whether the applicant has benefited from 'fair and effective procedures for determining status and protection needs'".
	The term "protection needs" is precisely what we understand by "exceptional leave to remain". So the rules call into question the whole application of due process to any particular case.
	I therefore join with and support the noble Lord, Lord Avebury, in urging the Government to consult fully and, in the case of this specific measure, to think again.

The Earl of Sandwich: My Lords, to begin on a more positive note, I think we are all relieved that the Home Office is reducing the backlog of asylum applications and is getting nearer to a coherent policy. Some of the bad law has been cleared away and we are all looking forward to the White Paper next month.
	However, the events of 11th September have not given any greater security to genuine asylum seekers—rather the reverse. There are many people who suspect that the Government are clamping down on asylum seekers or are about to. Here we have amendments to the asylum rules which have caused a great deal of concern among the agencies which know about refugees. We all want illegal immigrants to be removed, but not without the proper safeguards that we would give to our citizens.
	The accelerated procedures were reviewed and criticised by the European Union Committee of this House in March. The committee said that they were no substitute for good decisions. It even doubted whether they had any place in the EU directive. The Select Committee on delegated legislation is to examine the matter tomorrow afternoon.
	The only challenge to certification is judicial review, which may now be undermined. While it is important for manifestly unfounded cases to be identified speedily and for people to be removed before they are able to abscond, it is equally imperative that asylum seekers have the benefit of legal advice throughout the legal process.
	Until now, the Immigration Appellate Authority has informed both parties of the decision to an appeal. But under the amended rules, the IAA's decision goes principally to the Secretary of State and may only reach the appellant some time later. Thus the Home Office may be able to take steps to remove the asylum seeker even before he or she has heard the decision. Surely any such action would be contrary to undertakings given by the Home Office in the recent cases of Pardeepan and Kumarakuruparan. At what stage under the new rules would the Home Office inform the asylum seeker's legal representative? Do the rules also apply to those who are not at risk of absconding?
	Finally, if an asylum seeker reasonably decides to take legal advice following a negative decision, can the Home Office improve on its present timetable of reporting both initial decisions and appeals? I can see what the Government are worried about. There are too many unfounded cases, and applicants may disappear. But at present the process can take months. It is surely unfair to spring a decision on a family and proceed immediately to removal before any time has elapsed. I know that that is not the intention, but it may be the result.
	Some have asked for a personal guarantee from the Secretary of State that no one will be removed within an agreed period after the determination, but it would be far better if the Home Office could rethink the implementation, workability and natural justice of the amended rules.

Lord Brooke of Sutton Mandeville: My Lords, I have great respect for the immigration Minister, the noble Lord, Lord Rooker, on the Front Bench and for the noble Baroness, Lady Scotland, who I believe is going to respond to the debate.
	I had a great many more cases in the last Parliament than I had ever had before—perhaps because of the silence of the Home Office in responding to many of them. I pay tribute to the Minister for the manner in which cases are being cleared up. I am grateful to him for the way in which he has responded to a lot of cases that I have raised with him in this Parliament that dated back to the previous Parliament.
	I shall dwell for a moment on the circumstances of the case to which the noble Lord, Lord Avebury, referred. I remember a deportation case involving a Lebanese several years ago that came to me just before Christmas. Cynics might say that the timing of the deportation case had some of the characteristics that the noble Lord, Lord Avebury, referred to with regard to the timing of the order. There were certainly those who thought that that might be so. It was a complicated case that totally took over my time and that of my secretary in the run-up to Christmas, which is a busy period, but we got in a massive submission to the Minister's office. One of the minor rewards was that the private secretary in the Minister's office with whom we were directly liaising spoke warmly about the amount of work that had gone into it and the quality of the manner in which it was set out.
	The decision was upheld, but the individual then disappeared immediately after Christmas when they were supposed to be at Heathrow. That is incredibly frustrating for everybody concerned. I freely acknowledge that it is frustrating for the Government as well. It was frustrating in a modest way for me and for my secretary, but our time had been freely given, so we had to write it off to experience. I certainly would not want to weigh that frustration against the rights of those who come to parliamentarians—I choose that word deliberately to embrace both Houses—with their cases.
	It is tragic that those who disappear—who presumably underlie the order—potentially queer the pitch for so many others by the atmosphere that they create. I understand the Government's frustration. I might even be prepared to give the Government the benefit of the doubt in the circumstances, but, just as it is helpful when making umpiring decisions in cricket to be able to see a replay of what occurred, I think that on this occasion, not least because of the eloquence with which the noble Lord, Lord Avebury, spoke, the Government owe the House a full and clear picture of why the provisions were brought in, and in particular why they were introduced in such a manner.

Lord Dholakia: My Lords, I am delighted that the noble Baroness, Lady Scotland, will be responding to the debate. She has an excellent record on human rights issues and I hope that she will see the reasonableness of our case. She need not worry about the Minister from the Home Office who is sitting next to her. His often tough pronouncements on immigration and asylum issues are probably meant much more for the press. His personal actions on cases that are referred to him often display many humanitarian considerations.
	I also thank the noble Countess, Lady Mar, for her contribution. She has first-hand experience on immigration appeals and her concerns must be taken very seriously.
	I am delighted to support my noble friend Lord Avebury in proposing that the rules laid before the House on 17th December be annulled. A number of noble Lords have already pointed out some serious issues of concern. We are told that the change is necessary to deal with potential absconders. No one underestimates the Home Office's concern about applicants who may vanish once they know that their appeal has been unsuccessful. However, the Home Secretary has a quasi-judicial function and he cannot and should not be allowed to act as judge and jury in a matter where legal process has not been exhausted. In his rush to reach the target set for deporting applicants, the removal directions have been set at the same time as the notification. In reality, that prevents applicants exercising their legal rights by nullifying any further legitimate application by the appellant on other grounds, such as whether any provisions of the Human Rights Act have been breached or whether there is a change in circumstances in either the appellant or the country to which the appellant would be removed that might prevent the enforcement of removal directions.
	Let me make it clear that we have no dispute with deportation orders taking place if all legal procedures have been followed. That is what Parliament intended. However, any procedure short of that takes away the independence of the judiciary and places the matter squarely in the hands of the Secretary of State. That is not what Parliament intended. My noble friend's Prayer is designed to prevent that.
	Other matters of serious concern have been highlighted during the debate. The rules were laid before Parliament just before the Christmas Recess, on 17th December, and came into force on 7th January. During that time your Lordships' House sat for only five days. The rest of that time was the Christmas Recess. That did not give enough time for consultation. Almost all immigration and asylum organisations have complained about that haste.
	Last week, I asked the noble Lord, Lord Rooker, whether there were any legal means by which an applicant could enter the United Kingdom and make an application for asylum. The Minister was bold enough to say "No". Of course, we all know that that is the state of play today. We have created conditions that make our signature to the 1951 UN convention on refugees a charade. If a person cannot enter the country or is prevented from doing so, what good is a convention, which is designed to protect those who are victims of persecution?
	I well understand the Minister's anxiety about those who are economic migrants, who do not qualify under the 1951 convention, but the Government make the laws and they have no right to circumvent an individual's access to law if that is provided for in statute.
	Consider the cases of asylum applicants from Zimbabwe. Was it not the pressure from Parliament and my noble friend that made the Home Office rethink its policy of deportation? Surely even after the certification that a claim is without foundation, the situation may change rapidly and therefore such certification does not mean that a claim is without basis. It is a fallacy that all certified claims are "manifestly unfounded". There is a risk that people will be returned home to face persecution. We need to abide by the safeguards that the law already provides.
	If my noble friend Lord Avebury had not protested so loudly, and had the Government not changed their stance, the only way of challenging refusal in such cases—and in cases in which there is no certification in force and the tribunal has refused leave to appeal—would be to apply for a judicial review in the High Court.
	Before this order, decisions were sent to the appellant and his representative as well as to the Home Office as soon as they had been made. Now there is to be a fundamental change. The outcome of such appeals will be sent only to the Home Office. It will be up to the Home Office to inform the appellant of the outcome at a time and place of its choosing.
	The reason offered by the Government is that the new measures will contribute towards improved enforcement of asylum appeal decisions, while upholding the independence of the Immigration Appellate Authority. That is utter nonsense. The crux of the matter is that it is to enable the Home Office to deliver negative appeal decisions if the appellant has exhausted all rights of future appeal. Does that include a judicial review at the end of the appeal process?
	Many of us were disturbed by a recent documentary about the immigration snatch squad. I was horrified that the Home Office was prepared to expose the identity of individuals in full view of television cameras. We would not allow such treatment in respect of those against whom a criminal conviction was pending. In this case, however, we are talking about asylum seekers who have committed no crime at all. The snatch squads would use their powers to deport and thus deny access to further legal process even if that were requested, and the applicant or his legal representatives would have no time to digest the decision on which the snatch squads acted.
	Although the accountability of snatch squads is a serious concern, it is a separate issue that we shall take up in due course. In this debate, there are other concerns on which we need ministerial clarification.
	Some asylum seekers are unable to appeal to the IAT, and many of them are not regarded as possible absconders. They, too, will find that their decisions have been sent to the Home Office. Will the Minister explain why the rules cover those who are not deemed to be at risk of absconding? Can she explain whether any precedent places a requirement on the IAA to inform one side but not the other of the result of the procedure? It is like a judge or a magistrate informing the police of a decision without the defendant being aware of it. The first time an appellant discovers the outcome of his case would probably be on the way to the airport, too late for any further legal process. Is that consistent with the protection of Article 6 of the ECHR? Will the Minister confirm that the rules do not breach that provision?
	Will the Minister explain how and at what stage unrepresented failed appellants will be allowed to contact a legal adviser? What criteria will be used to determine which failed appellants are likely to abscond? Do the Government have any plans to establish a complaints machinery similar to the Police Complaints Authority so that there is proper accountability of the snatch squads' work? I ask your Lordships to cast back your minds to the case of Joy Gardner which resulted in street riots in Tottenham. Surely, there is a real danger that such a situation may arise if decisions are taken but appellants are not even sure why the Home Office has ordered their removal.
	My noble friend Lord Avebury, with his vast experience in human rights, has rightly challenged the Government on the rules. I look forward to the Minister's explanation with great interest.

Lord Dixon-Smith: My Lords, I cannot but feel that everyone involved in this debate, whether they are advocating the solution advanced by the Government or the case in favour of asylum seekers, is in the same position: we are all between a rock and a hard place. The fact is that this country's record on asylum seekers has been, and remains, remarkably good. Of course, within that good record there are occasional tragic errors. It is absolutely right that everyone should be properly concerned about those errors and seek every means by which they can be eliminated.
	It is, however, also the fact that the number of asylum seekers has increased dramatically in recent times. It is also the fact that the number of those who have gone through the due process and failed to have asylum granted is not matched by the number of those leaving the country. That is a very difficult dilemma to deal with. Tragically, those who escape the system prejudice the whole system for those who have a legitimate case and ought to remain. I think that the empirical evidence would suggest that there are far too many people in that category and that they sadly outweigh the failures of the system, if failures there be. That is the reality that we are dealing with.
	I do not think that anyone takes any pleasure from the situation in relation to Zimbabwe. The Government were rather slow in acting on a case in which it was quite obvious that we were dealing with a government who had gone seriously astray and in which the rule of law as we understand it in European terms had completely broken down.
	There was movement in that direction, but there has also been movement in another direction. Although I would be the first to acknowledge that there are still severe questions about the state of affairs in Afghanistan, there is marked improvement there. How is it possible to make the judgment in respect of asylum applicants from Afghanistan who have come here in tragic circumstances, as the result of a regime that no longer exists? I agree that there are question marks over the stability of the new regime there. But are we to say, as we very easily could, that we have no confidence in so much work that is being done by so many people from this country—I pay tribute to the Prime Minister for his part in this—and from America and the United Nations? They have tried to rectify a tragic situation. If we are saying that, should we acknowledge it?
	The fact is that hard cases make bad law, and we have seen many hard cases. However, the generality of the law has been good. I echo particularly those who ask the Government whether the appeals mechanisms are satisfactory. The purpose of serving appeals notices in person on an applicant is to prevent his disappearance. If that meant that someone was to be immediately whistled off and put on an aeroplane when he had further legal recourse that he ought to have used, it would be wrong.
	So the credible question is on the detail of how the new rules will work. That is the appropriate question to ask the Government at this stage. As only the Government can answer it, having asked it I shall sit down.

Baroness Scotland of Asthal: My Lords, I am grateful to the noble Lord, Lord Avebury, for giving us this opportunity to discuss the important points that he has raised. I was not surprised to see that my noble friend Lord Judd has been joined in the debate by the noble Lord, Lord Hylton, the noble Earl, Lord Sandwich, the noble Countess, Lady Mar, and the noble Lord, Lord Brooke of Sutton Mandeville. I think that we are all old friends and have been on this journey many times. I should like particularly to thank the noble Lord, Lord Dholakia, for his kind comments, and for the sting that he always brings with them. I am grateful also to the noble Lord, Lord Dixon-Smith, for his questions and implicit support.
	The moral, legal and practical anxieties that have been ventilated in this debate are very well understood by the Government. A balance has to be struck between improving the lot of those who should and must benefit from the asylum that our country rightly gives, and those who seek to abuse the system and take adventitious and improper advantage of the benefits that asylum brings. I think that no noble Lord has failed to emphasise that point, and rightly so. But, as noble Lords know, being just means that when it is right to do so we must be able to say no. I know that for many of us—I do not exclude myself from this group—that is a word we find difficult to say. I do not suggest that we should say it precipitately or ill advisedly. However, we have to separate and protect the sheep from the wolves. The mechanism which the rules provide may assist us to do that.
	Many noble Lords, not least my noble friend Lord Judd and the noble Earl, Lord Sandwich, asked what happens if a tribunal or an adjudicator gets it wrong and there are further or other issues which should properly be taken into account. I reassure the House that we have the comfort of the availability of proper, robust legal advice and an avenue through judicial review, if the grounds are there to support it, at the disposal of the failed asylum seeker through which such decisions can be reviewed. I reassure noble Lords that there will be no worrying irrevocable step to be taken in that regard. I hope that my noble friend Lord Judd will particularly welcome that statement.
	We believe that we have achieved the correct balance. The policy forms part of our wider reforms to the asylum system. Our aim is a fair and efficient system to integrate genuine refugees into society swiftly and to remove without delay those who fail to gain asylum. Everyone will continue to have a fair opportunity to put forward his or her claim, however weak or strong it may be. The measure contributes towards the developing strategy for maintaining contact with asylum seekers by means of initial briefing and reporting at accommodation centres, reporting centres or police stations as part of the asylum support arrangements. All those measures together will help to ensure that asylum seekers fully engage in the consideration of their claim.
	A number of noble Lords asked about implementation. The noble Lord, Lord Avebury, suggested that the rules were "sneaked in" over the Christmas Recess. I believe that that comment was echoed by the noble Lord, Lord Hylton, the noble Earl, Lord Sandwich, the noble Lord, Lord Brooke, and, indeed, the noble Lord, Lord Dholakia. I believe that it was also echoed by the noble Lord, Lord Dixon-Smith. I by no means wish to leave him out of that illustrious company. I reassure the noble Lord that the rules were introduced under the ordinary parliamentary procedure for this kind of statutory instrument. They were published by the Stationery Office shortly before they were due to come into force. At the same time they were made available on the Internet. A press release was issued as soon as they came into force and before that, before Christmas, the next day after they were laid before Parliament, copies were sent to organisations with an interest in immigration issues. No decisions could be sent to the Home Office for delivery until the rules came into force. I reassure noble Lords that in reality no one could possibly have been affected by the new rules until all those with a recognised interest in these issues had had time to assess them.
	We had a consultation process. There was consultation with the Council on Tribunals. A draft of the rules was sent to it on 28th November. It was asked to comment by the end of the week and it did so by letter received on 30th November. We replied. There was also consultation with the chief adjudicator and the president of the Immigration Appeal Tribunal.
	The implementation of the new method of delivering appeal decisions in person will happen gradually. Initially, only a small number of decisions will be served personally on asylum seekers, limited to four geographical locations. I reassure noble Lords that there will be a full evaluation of the policy in March to ensure that the scheme is working fairly in every case. I reassure the noble Countess, Lady Mar, that we agree that to be successful that process must be effective.
	The Government understand the concerns that legal proceedings must be fair, and must be seen to be fair. That refrain echoed around the House. The courts, including the European Court of Human Rights, rightly attach importance to the perspective of the person who loses. But that person's perspective is not the only one to accommodate. Fairness is an objective concept, not a subjective one.
	If the Government permit a judgment to be evaded or frustrated by another individual, or by the state, that would constitute a violation of the successful party's fundamental right to a judgment that was effective and not nugatory. Inherent in the law of human rights is the search for a fair balance between the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights. Those are not my words but the words of the European Court of Human Rights.
	I believe that the noble Lord, Lord Avebury, among many others, rightly asked me to confirm how the procedure is intended to operate. That point was echoed by a number of noble Lords. The effect of the new rules is that where, and only where, no further appeal lies from the decision of an adjudicator to dismiss an appeal under rule 15, or from a decision of the Immigration Appeal Tribunal to refuse leave to appeal under rule 18, the notice of that decision will be delivered by the Home Office. Delivery may be by post or in person. In either case delivery will be prompt. Decisions to be posted are dispatched within two days. Decisions to be delivered in person will be delivered within two weeks whenever possible. Legal representatives will be notified within 24 hours of a decision being served. It is intended if possible that they will be sent notification by fax as opposed to by post. I hope that that deals with the question of the noble Earl, Lord Sandwich.
	The changes make no difference whatsoever to the conduct of cases before the adjudicator or the Immigration Appeal Tribunal. I am happy to be able to confirm that as I know that it is something the noble Countess, Lady Mar, was rightly anxious to underline. An asylum seeker will have exactly the same opportunities as now to present his or her case.
	I was also asked about the Immigration Appellate Authority, whether decisions will be served after two months and what will happen if the Home Office fails to do so. The Home Office must tell the appellate authority when and how it has delivered the decisions. The rules require that. The appellate authority will chase the Home Office. We know how efficient the appellate authority can be in that regard. If it does not receive notification within six weeks that the decision has been delivered, it will be able to follow that up. The appellate authority will keep chasing the Home Office until the decision is delivered, but it will not send it out itself.
	The changes make no difference to the availability of review by the chief adjudicator under rule 16 or by the Immigration Appeal Tribunal under rule 19. The changes make no difference to the availability of judicial review. If an unsuccessful asylum seeker is applying for judicial review to the High Court, the Home Office will not remove that person from the United Kingdom for at least three days to allow the application to be made. The Administrative Court Office will accept the application by fax. If an application for judicial review is made, the Home Office will not remove the applicant from the United Kingdom until that application is determined. We have an assurance.
	If the unsuccessful asylum seeker is detained, he or she is given an effective opportunity to take legal advice. Telephone calls may be paid for and details of the Immigration Advisory Service and of the Refugee Legal Centre are displayed in a number of languages in all removal centres. All of that will continue to be the case.
	The new rules give the Home Office no unfair advantage. They deprive no one of the opportunity to apply for a chief adjudicator's or appeal tribunal review. They deprive no one of the opportunity to apply for a judicial review. They deprive no one of the opportunity to take legal advice. The only opportunity of which anyone is deprived by the new rules is the opportunity to evade or frustrate the carrying into effect of the judicial decision in their case. And no one has a fundamental right to frustrate justice.
	I thank noble Lords for the way in which they have expressed their understanding of the need to distinguish between the valid asylum seeker and those who seek to abuse the system. That is an important distinction that we must all rightfully bear in mind.
	The Government accept—I reassure the noble Lord, Lord Dholakia, on this point—the current legal position. As the noble Lord knows, that position is that immigration cases do not engage Article 6 of the European Convention on Human Rights; that is, the right to a fair trial. That has been the judgment of English and Scottish courts, and of the European Court of Human Rights. But the Government willingly accept that those seeking asylum are as much entitled as any other litigant to the standards of fairness that the common law requires.
	In other legal proceedings, it has for many years been the case that where a court order might be frustrated by its recipient, the applicant can apply for the order, and then can enforce it, without giving the recipient advance notice. No one has yet successfully alleged that that procedure compromises the independence or impartiality of the court, or violates anyone's fundamental rights, even where the order is in favour of the government. It is true that in each of the cases where that has been found, the recipient has the chance to have the order reviewed by a court under some procedure or another. But what we are doing here is exactly the same in this regard. It is true of instances where there is an exception and it is true in this case, too.
	Under these new rules, the unsuccessful asylum seeker will not receive a mere statement of the failure of his or her appeal. Just as now, the decision delivered will be the reasoned judgment of the adjudicator or of the Immigration Appeal Tribunal. That is itself an essential ingredient of fairness, because only if adequate reasons for a judgment are disclosed can the parties—and the public—understand why it was given. Only if adequate reasons for a judgment are disclosed can the unsuccessful party formulate a reasoned challenge if he or she wishes. Those fundamental rights are wholly untouched by the new rules.
	I well understand the visceral reaction that to allow one party to a dispute to know the outcome before the other must be unfair. However, I reassure noble Lords that there is here no such disadvantage or unfairness. In a case involving a Belgian court fully 30 years ago, the European Court of Human Rights commented on the perceived unfairness in a case. It said:
	"If one refers to the dictum 'justice must not only be done; it must also be seen to be done', these considerations may allow doubts to arise about the satisfactory nature of the system in dispute. They do not, however, amount to proof of a violation of the right to a fair hearing. Looking behind appearances, the Court does not find the realities of the situation to be in any way in conflict with this right".
	I think and hope that when noble Lords have an opportunity to consider how the rules will operate, they will adopt the same position as the Court of Human Rights did in that case. I hope that they will be able to say, "In truth, there is no disadvantage, no matter what the perception may originally have been". We argue—and argue strongly—that the rules do not subvert justice; but in fact, if properly looked at, they may very well sustain it.

Lord Avebury: My Lords, it only remains for me to thank most warmly all noble Lords who have taken part in the debate. In particular, I thank the Minister for the careful and extremely thorough explanation that she gave of the way in which the procedures will work. That has reassured noble Lords to some extent.
	However, the views of the agencies have been echoed in all quarters of the House; they are that the procedure is not satisfactory. We shall watch extremely carefully how it will work in practice. I was extremely glad to hear the Minister say that at the beginning the arrangement will be tried experimentally in four geographical areas and that there will be a review in March. I hope that the Minister will report to noble Lords in March on what the experience has been of the experiment, so that we can express an opinion on whether the procedures are satisfactory or need to be revised.
	The Minister said that the rules are part of the wider reform of the appeals system. I still wonder why on earth it was necessary to rush them through in the way in which that was done. She brushed aside the concern that was expressed by several noble Lords; namely, that the rules were pushed through during the Christmas Recess. The fact is that they came into operation on 7th January, which was the day before noble Lords came back from the recess. There was therefore no satisfactory opportunity for us to consider the rules before they became law. That is the position.
	The Minister said that there had been consultations. She mentioned that the draft was sent to the Council on Tribunals and that it had replied. I also believe that the chief adjudicator was a recipient of the draft at the same time. Would the Minister be kind enough to say whether the draft that was presented and the comments that were made on it could be placed in the Library of your Lordships' House? Does she accept that consultations at that level are no substitute for the involvement of the whole refugee community? I believe that it was the noble Lord, Lord Judd, who said that it was extremely important to have good relations between all those concerned. That does not mean simply those on one side of the fence, such as the adjudicators and the tribunal; it also includes those acting on behalf of the appellant. They were not given the opportunity to enter into the consultations.
	If I understood the Minister correctly, she said that the decisions of the adjudicator would be served on the appellant within two weeks. In the case of tribunals, if decisions were not served within six weeks, the tribunals would want to know why. There seems to be a fundamental difference in the two cases that are set out in the rules. In the first set of cases—those that are dealt with by the adjudicator—the appellant will not have very long to wait. However, in the other cases, the appellant may wait six weeks—or it may be such longer period of time as the tribunal is prepared to tolerate.

Baroness Scotland of Asthal: My Lords, I make it clear—I hope that this helps the noble Lord—that it is our intention that the decisions will be served as soon as is reasonably practicable. As I said in my earlier response to the noble Lord, very few such cases are likely to be subject to the new procedure. We shall monitor how quickly the procedure can be carried out. I reassure the noble Lord that the estimates that we are currently giving are simply estimates, because the procedure has not yet been tried. I also reassure noble Lords that we shall seek to place the necessary documents in the Library.

Lord Avebury: My Lords, I am extremely grateful to the noble Baroness for that assurance. But I have to warn her that I do not believe that the agencies will be wholly satisfied with what she said about the time limits. I believe that many of them would like the Home Office and the Lord Chancellor's Department to have a fixed time within which to serve the notices instead of it being a matter of "suck it and see"; that is, "Wait to see what happens in the experiment and then we'll come back to you".
	Finally, I want to take up the point that the noble Baroness made in relation to the three-day period. That seems to be a very short time within which the appellant—if he is taken into custody as a result of this process—must claim legal advice on further action by way of judicial review. Let us imagine that he is waiting to hear the outcome of his application to the adjudicator or tribunal. The first that he knows of it is when, as we said, the snatch squad descends and takes him, and perhaps the whole of his family, to Harmsworth. I did not ask the noble Baroness about that issue. What will the procedure be when it is not only a question of an individual but of the whole of his family which resides with him? Will they be taken into custody at the same time?
	As I understood the Minister, having been taken to Harmsworth, Trinity House or wherever, the appellant then has only three days in which to contact his lawyer to discuss whether or not there are grounds on which judicial review can be sought. That seems to me to be a very short time. I am not a lawyer, but I believe that the agencies may have something to say on the matter.
	Obviously, as a result of this debate we know a great deal more about the procedure and I am enormously grateful to the noble Baroness for that. I believe that she will find that after this evening there will be further communications between the agencies and the Lord Chancellor's Department and even perhaps with the noble Lord, Lord Rooker, who we are very glad to see sitting beside her on the Bench. Having said that, I beg leave to withdraw the Motion.

Motion, by leave, withdrawn.

State Pension Credit Bill [HL]

House again in Committee on Clause 15.

Lord Hodgson of Astley Abbotts: moved Amendment No. 86:
	Page 9, line 18, at end insert—
	"( ) For the purposes of this Act, a person's earnings shall not include any income arising from rent or the release of equity in a person's principal place of residence.".

Lord Hodgson of Astley Abbotts: With this amendment we come back to the questions that we were discussing before we adjourned with regard to other income and other assets. I do not suppose that the amendment is by any means perfectly drafted. But I should like to explore the Government's intentions on this matter because it is an issue that may well affect a number of potential recipients of the pension credit.
	The people to whom I refer are those with modest earnings who have taken advantage of the right-to-buy legislation and have probably now paid off their mortgage. They therefore have an unencumbered capital asset in the shape of their home, disposal of which is, of course, capital gains tax-free. Therefore, when the Minister referred to an unlevel playing field in the treatment of savings, this is another area where there has already been quite a tilt towards a particular asset.
	It is likely that such people will wish to remain in their homes in their old age. Their home may be in an area with which they are familiar, where their friends are around them and where there are social facilities that they understand. But, bearing in mind their overall wealth, they may wish to use that asset to extract value from it. There are clearly several ways in which they could do so: they may wish to receive rental income from renting out a room to a student or someone who is temporarily residing in the area where they live; they may wish to enhance their standard of living by releasing part of the equity of the house—there are building societies that offer that particular facility; or they may wish to raise a loan taken out against the home by means of a mortgage which will be repaid after their death either by selling the house or by their heirs paying off the mortgage.
	I am anxious to find out from the Government where that capital asset and the potential income that flows from it, some of which may be lumpy in the shape of equity release and some of which may be a stream of income in the shape of rental income, fits into this proposal. I look forward to hearing the Government's response. I beg to move.

Baroness Noakes: I rise to support the amendment in the name of my noble friend Lord Hodgson. The treatment of homes is clearly significant. It represents the major capital asset for the vast majority of pensioners. My noble friend's amendment refers to excluding certain forms of income from earnings, although I believe that he had in mind a broader definition of income for that purpose. My concern would be to ensure that the kind of income or gains of which he spoke would be excluded. Perhaps I may ask the Minister to confirm that the value of the capital asset—the home—is not included in the capital for these purposes and, in particular, not for deemed income calculations.

Baroness Hollis of Heigham: As I understand the noble Baroness's last question, the principal residence—a home—is not included at any point; nor are what I would call "personal chattels", such as furniture, fixtures, a car and such other items. The use of some capital to buy a replacement car, and so on, would also be exempt from any problems in this regard. I believe that that is a sensible definition which, I hope, will be of help.
	Amendment No. 86 asks that we do not treat as earnings income arising from rent or from the release of equity in a pensioner's principal place of residence. As the noble Baroness said, such forms of income would not, in any case, normally be treated as earnings. However, I am sure that it would be more helpful to the Committee if we dealt with the intention behind the amendment, which, I suspect, was to probe our proposed treatment of such income streams.
	Currently fewer than 5,000 pensioners who claim MIG also receive income arising from rent in a pensioner's principal place of residence; in other words, from boarders or lodgers. Such income is not defined or treated as earnings. Those pensioners benefit from varying levels of disregard depending upon the terms of their boarding or sub-letting arrangement. A disregard of £4 or £13.55 per week is applied for lettings without board—the level of disregard depends on whether heating costs are covered in the charge—and a weekly disregard of £20 is applied for lettings with board.
	This is a complex area and we intend to cover in regulations the detail of the level of future disregards. We are seeking to simplify the rules as they currently stand. It is estimated that just under 10,000 pensioner households entitled to pension credit—unlike the 5,000 who receive MIG—will have income from boarders or lodgers. I can assure the noble Lord that the new rules that we introduce for this income stream will be at least as generous in all cases as those currently in place in relation to MIG.
	I turn to the second issue concerning equity release schemes whereby a pensioner sells all or part of his home for an annuity and retains the right to live in the home for the rest of his life. Such schemes can be used to provide additional income in retirement to supplement pensions or to pay for long-term care or home repairs. The home is the largest investment for many pensioners and some plan to use it as a source of income in retirement.
	We intend that under pension credit the capital available from an equity release scheme will be treated as are any other savings or capital holdings used to provide income in retirement. Such capital will be taken into account in the income assessment for the purposes of determining entitlement to the guarantee credit and rewarded in the savings credit.
	In common with many of the other income streams that we have discussed in relation to Clause 15, our policy on equity release schemes aims to strike a balance between reforming the capital rules so that they are fair and simple and avoiding destabilising the personal finance market by incentivising one form of providing for retirement above others. This is "level playing field" stuff. If we were to treat income from equity release schemes more favourably than other forms of capital—by disregarding such income, for example—the result would be to increase the incentives to take out equity release schemes. Such a policy would treat home owners more favourably than other pensioners at an estimated cost of £25 million.
	Pensioners can derive income from their principal residence by renting out rooms to lodgers or boarders or by taking out an equity release scheme on the value of their home. As we develop further the detailed treatment of different forms of income within the pension credit regulations, we shall no doubt revisit these issues. However, I hope the noble Lord is reassured that we are committed to treating pensions with such income streams with fairness and increased simplicity. I urge the noble Lord to withdraw the amendment.

Lord Hodgson of Astley Abbotts: I am grateful to the Minister. One matter on which I am not clear concerns equity release. If one had no savings other than a principal sum released from one's home, over and above the £6,500, which is free, the rest will have a deemed income stream of 10 per cent attached to it. Am I right in thinking that?

Baroness Hollis of Heigham: I am not sure where the noble Lord is coming from. If the equity release scheme provides an income flow analogous to an annuity, or something like it, it will be treated in that sort of form. The read across is to income flows not capital, and therefore to notional income derived from capital for these purposes. After all, someone could take an equity release scheme for 25 per cent, 50 per cent or 75 per cent of the value of house, depending on the person's age and so forth. I believe that that should be treated as income in a similar way to other forms of retirement pension income.

Lord Hodgson of Astley Abbotts: It is just that that equity release does not have to take the form of annuity. An equity release can take the form of a capital sum, which may be used in any way one wishes. It does not have to be put into a savings instrument carrying a fixed return. It can be just a capital sum, for instance, a mortgage, out of which one has a capital sum which can subsequently be deployed. Let us suppose that that sum was £20,000, for whatever reason, and one had no other savings. Would £19,000 therefore carry a £1,900 pension savings credit?

Baroness Hollis of Heigham: My understanding is that if there were no other savings, and we are talking of a lump sum, that would be the case. If I am wrong on that, I shall write to the noble Lord.

Baroness Turner of Camden: Before the Minister sits down I wonder whether she could answer a question I have. A number of financial services providers have been putting home income plans on the market with a view to attracting pensioners who have a property but a very low income, and persuading them that they can add to their income through a home income plan. I take it that income from a home income plan will be covered by what the noble Baroness has just said?

Baroness Hollis of Heigham: Yes, that is my understanding.

Baroness Barker: Before the Minister sits down, one of the purposes for which people use equity release is in the repair of property. If equity was released for that purpose, presumably it would not be taken into account? I refer to calling down small amounts of money in order to make capital repairs.

Baroness Hollis of Heigham: I do not know. Perhaps I may follow that through. I cannot see how that would fit into any obvious policy point with which I am familiar. Perhaps I may check on that. The read across to capital is where one has capital because it has come as a lump sum. If some of that capital is used for purposes which you and I would regard as perfectly sensible, in other words, one is not getting rid of that capital by divesting it in order to increase one's pensioner credit—for example, by buying a replacement car or replacement furniture and probably, but I shall check, repairing one's home—that would then be acceptable. That would not be regarded as divesting oneself of capital which one has perfectly properly drawn down from one's property. However, if that is not the case, I shall write to the noble Baroness.

Lord Hodgson of Astley Abbotts: I am grateful to the noble Baroness. We have had a useful exploration of this topic. As I said, this is a probing amendment. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Barker: moved Amendment No. 87:
	Page 9, line 18, at end insert—
	"( ) For the purposes of this Act, a person's income shall exclude royalties, up to a maximum of £1,000 per year."

Baroness Barker: All the amendments we have discussed so far on the subject of earnings have, by and large, dealt with income which is either predictable or within the control of the person who receives the benefit. Amendment No. 87 is a probing amendment to raise the issue for when the department considers what will be done about the minority of pensioners—I accept it is a minority—who are receiving small amounts of unpredictable income.
	I imagine that the noble Baroness will say that the five-year assessed income period will deal with many such problems. Indeed, it will. The torment of people who receive small amounts from books which, by definition, were not terribly popular but generate enough to put them over a weekly limit, is well known to people who deal with benefits.
	This is a way of saying that there are a number of such small oddities. There may be a number of pensioners who receive income over which they have no control. Can the Minister say whether such issues will be taken into account in the consideration of what will be considered as earnings?

Baroness Hollis of Heigham: Along with polygamy, Amendment No. 87 takes the prize for the most ingenious amendment, or the one most coming in from offside.
	Amendment No. 87 proposes a £1,000 annual disregard on income from royalties, which is equivalent to a weekly disregard of £18. In discussing Clause 15 and the sequence of amendments we have had, I have been trying as far as I can to share with noble Lords as much of the detail of the regulations concerning what income streams will and will not be taken into account. I understand the problem we are in where I cannot lay out a tidy shopping list of regulations. However, there are still certain infrequent or less common forms of income on which we have yet to make a firm policy decision as to how, if at all, we take them into account. Income from royalties is one such area. I have to say, frankly, that until I saw the amendment it did not occur to me to consider how to deal with a book seven years down the line when one is back down to receiving £220 per year royalties.
	According to the family resources survey, there are currently some 26,000 people over the age of 60 with some income from royalties. Of those, around half have royalties below the suggested limit of £1,000 per year. Although it was not mentioned by the noble Baroness, perhaps we should consider, almost in the same breath, how public lending rights are treated, which are analogous. I am thinking of a situation in which I might receive royalties of X, but my public lending rights will be, perhaps, £247. We need to have a read across in that way.
	It is difficult, because of the small survey sample sizes, to say exactly how many of those 26,000 pensioners would also be entitled to pension credit, but we estimate that perhaps 10,000 might be. Income from royalties is currently taken into account and treated as a form of earnings in relation to MIG and, compared to a continuation of the current MIG policy, the cost would be approximately an extra £5 million.
	These are not simple matters. As I said, until the noble Baroness mentioned it I had not picked up on the fact that we must also consider PLR and related issues, particularly given the royalties "bunch". There are very complex rules. Most royalties are received in the first two years of a book being published. There may then be another chunk if the book goes into paperback. Equally, one may have worked over a long period of years writing the book. We therefore need an equalisation mechanism. These are complex areas. I know from my experience—the noble Lord, Earl Russell, will confirm this—that the issue is treated in complex ways by the tax system. We need to take care.
	Perhaps the noble Baroness will allow me to return to the issue when we have got our head round this small, complex system. Even the Inland Revenue has considerable difficulty working out whether Schedule D or Schedule E applies and as to whether or not the book was written by virtue of one's occupation, if one is a university academic. That counts differently for tax treatment. I believe there may be some interesting questions to follow on this matter. If I can write to the noble Baroness and place a copy in the Library so that we do not trouble the House on Report, I shall do so. If not, she may have to revisit the matter and I shall see whether I can get a more satisfactory answer for her.

Earl Russell: I declare an interest in Amendment No. 87. The Minister's response was generous, thoughtful and helpful. However, the problem goes a little wider than just royalties. There is a problem in cases where income is received in a regular way and the amount that is coming in when the tax is due is a great deal less than at the time when the tax is assessed.
	The classic example is the woman who was bankrupted by being left £1 million in shipping shares. The shipping shares were assessed for duty in April 1929 and the duty was payable in October 1929. Is it possible to have some thought on that problem as well—although I hope that those particular circumstances may not recur?

Baroness Hollis of Heigham: I cannot conceive how the noble Earl can contemplate the Chancellor of the Exchequer producing a situation in which shipping shares worth £1 million in April are virtually worthless by October. The noble Earl normally tells me that he is not worried—if I may paraphrase him—about what the present Government may do but what the present government after seven may do. With regard to that situation, God knows what has happened to the economic cycle—and I bet He does not either.
	More generally, to make the picture more complex, one of the things that we are trying to do with the five-year assessment period is to look at stable income. Royalties of this sum are small and irregular. If they were bunched in one or two years and were substantial, that might be a reason for delaying the five-year assessment for, say, two years if that was the main source of income, until the flow had become steady. The issue is complex. I shall write to the noble Baroness or, if necessary, we shall revisit the matter.

Baroness Barker: I have no interest to declare on this matter. I did not know that my noble friend would be joining me for this debate. We were not in cahoots on this matter. I was very modest; I did not mention any interests that any noble Lords may have, and there are quite a few who have. In support of my noble friend, I would say that in a week when Enron has been in the news, share values disappearing through the floor is not as unlikely as may have once seemed to be the case. That is not a comment on our Chancellor. It is an issue that I was sitting thinking about when the noble Baroness, Lady Noakes, was talking about employee shares and so on.
	This is a small issue. I picked it as being illustrative of small amounts of irregular income which cause problems. I accept entirely that the five-year assessed income period will make life considerably easier for people in this situation. It is a fiendishly difficult matter. I had thought about public lending rights but decided, for the sake of simplicity, not to put that down. I am very grateful to the Minister and am also rather honoured to have got the noble Baroness on a subject where she appears to know not quite as much as some Members of the Committee. It is my one score of the night. I thank her for her technical answer and look forward to her writing to me. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Turner of Camden: moved Amendment No. 88:
	Page 9, line 19, leave out subsection (2).

Baroness Turner of Camden: Amendment No. 88 seeks to leave out subsection (2) of Clause 15. Subsection (2) confers power to make regulations to define how capital holdings will be taken into account in calculating pension credit. Paragraph 124 of the Explanatory Notes states that,
	"Capital will be deemed to have an assumed rate of return for purposes of assessing entitlement to the guarantee credit and savings credit. The intention is that a ten per cent rate of return will be applied to capital that exceeds £6,000 (£10,000 in cases of people in residential care and nursing homes). Capital below this amount will not be taken into account in the assessment".
	I have some difficulty with the wording of this clause which deems that an income will be forthcoming. At the present time, investments of all kinds—including long notice bank accounts—may not be yielding very much. If interest rates continue to be low and the return from investments poor, claimants could be deemed to have income which they may not actually have had.
	I believe that the Government have a formula for dealing with this matter, but deeming remains on the face of the Bill. That is what concerns me. I beg to move.

Lord Hodgson of Astley Abbotts: Amendment No. 91 in this group is tabled in my name. Although I do not approach the matter in quite the same way as the noble Baroness, Lady Turner, I have a great deal of sympathy with what she has said. I find the wording of Clause 15(2) curiously open-ended and opaque. We should make the position clearer. The proposed methodology for pension credit has the fundamental unsatisfactory nature that it does not coincide with reality. As pointed out by the noble Baroness, £6,000 savings carrying no credit at all and then 10 per cent thereafter leaves one with the position that the one certainty is that the person will never earn that rate of return, either zero or 10 per cent, on any part of their savings.
	That reminds one of the old statistical joke about a person with one foot on a blast furnace and the other foot on a iceberg being statistically comfortable. In the pension credit proposals—the deeming proposals—there is the reference to £10,000 savings carrying an overall 4 per cent return. That may be perfectly fair and the central objective of the Government, but in terms of what interest rates are today, let alone what they may be over the next few years, it is not a generous figure. The redemption yields on long dated gilts, which is probably the nearest comparator to pension credit, are around 5 per cent and leading UK corporate bonds are around 6 to 6.5 per cent.
	Amendment No. 91 seeks to make sure that if the regulations are to be set up in this way we shall have some duty imposed on the Government to have regard to the nearest comparable savings instrument—namely, long dated UK corporate bonds. That is 15 years and over. That is the benchmark savings rate that the Government can borrow at and that people might be hoping to earn as a return. It is important for the Government to have some duty to consider that in producing regulations under Clause 15(2). Further, it is an important safeguard for people receiving the pension credit in the future.

Baroness Noakes: Subsection (2) of Clause 15 takes us into the realm of fantasy when looking at income. The Minister has said that this approach was taken because of the responses to the consultation paper issued in 2000 that this was simpler for many pensioners. Being simple does not make it fair and right. It will not be right for all pensioners. Some pensioners who have little or no income will not be troubled by this rule. However, coupled with the 10 per cent assumed rate of return, it will affect a number of pensioners with relatively modest savings.
	The amendment in the name of my noble friend Lord Hodgson is important. It replaces the 10 per cent assumption with a more reasonable assumption in line with fairly safe investments for pensioners' money. However, even that proposal would still produce some anomalies although with the lower rate they would not be so bad. The 10 per cent rate would mean that with capital above £12,000 the assumed rate rises quite steeply. At £25,000, the House of Commons Library calculates that the effective interest rate is 7.6 per cent; and it increases at higher savings levels.
	There is a fiction involved in the savings credit for pensioners with these relatively modest savings. A pensioner with savings capital of £25,000, and the effective interest rate of 7.6 per cent, under the Government's proposals will be deemed to have £36.54 per week. He would not receive any guarantee credit. With the basic state pension he would be over the £100, but he would receive a savings credit of £8.38.
	If that pensioner earned only 5 per cent—he would be doing quite well at 5 per cent on £25,000—he would receive only £24 a week. So the Government would pretend to themselves that the pensioner's income is just short of £122 a week and would congratulate themselves on boosting the pensioner's income by the £8.38 savings credit. However, the reality is that that pensioner has received only £109 in total including the savings credit. That is so little above the guarantee credit threshold that the pensioner might conclude that he might as well blow £19,000 of his savings, take the guarantee credit and stick at £100.
	If the pensioner has index-linked securities where the yield is currently around 2.5 per cent, the position is even more dire. If that is the incentive for today's pensioners, think how little incentive the new savings credit will create for tomorrow's pensioners. I accept that it affects particularly those pensioners with savings beyond the £12,000. But those are not an inconsiderable number. I had assumed that the Government sought to create incentives for people to save for their retirement and this proposal will work in the opposite direction.

Baroness Hollis of Heigham: I shall give a general defence about the proposed treatment. Amendment No. 88 seeks fundamentally to alter the way we propose to treat capital by removing the power to assume a notional rate of income from capital held. The proposed amendment would force us to take actual income from capital into account. The Committee will recall that this was the approach that we initially suggested in the consultation document for pension credit. Indeed, it is the way followed by the Inland Revenue.
	However—I keep repeating this—we listened to the views which emerged from that consultation process and took into account the clear advice of Age Concern and others. They told us that pensioners do not want the trouble of recording actual income from capital, or having to go into the building society to bring interest to account just because it suits the Government.
	I think back to my mother's experience. She had a couple of building society accounts with modest sums in each. The last thing she wanted was to try to work out her gross and net interest and what had or had not been deducted at source. It is much simpler to add together the £5,000 here and £6,000 there. Those were the savings. On that basis, the first £6,000 would be disregarded with 10 per cent assumed rate of return on the remainder. That is infinitely simpler, preventing intrusions into pensioners' lives, checking and re-checking books and so on.
	We are conscious of the need also for pension credit to preserve the equilibrium of the savings market. I have not sought to make political capital on this. We have gone perfectly properly through a series of probing amendments on different aspects. Whether we refer to ISAs, PEPs, annuities or employee share schemes, we seek not to privilege one form of savings over another for purposes of pension credit both with regard to the overall cost of pension credit and the stability of the personal finance market.
	To put it bluntly, were we to take actual income from savings into account, as the amendment suggests, we would skew pensioners' choices about how to invest their capital. They would seek different forms of capital from what might otherwise be appropriate for them. They would look for products where interest was low, such as Premium Bonds, or even put money under the mattress—something we do not wish to encourage.
	The noble Baroness used the word "fairness". Amendment No. 88 may seem to provide a fairer way of doing things. But the noble Baroness may be interested to note that, given a choice between the Government's proposed policy and her amendment, most pensioners with low and modest savings—those are the ones we are out to help—would gain more from a £6,000 capital disregard combined with a 10 per cent assumed rate of return (the approach in the Bill) than from the proposed amendment.
	The Government's policy means that more than 90 per cent of around 3.5 million pensioners entitled to pension credit face an effective rate of return of less than 4 per cent. Something like 94 per cent of all pensioners would have a rate of return of below about 5.2 per cent as a result. But the proposed amendment would cost a substantial amount, of about £400 million, and would generally benefit better-off pensioners with large amounts of capital at the expense of pensioners with more modest savings.
	That is made clear when one sees the difference between that and our current treatment in MIG. At the moment in the minimum income guarantee there is a disregard of £6,000, with a cut off at £12,000. Not only is there a rate of return at £1 in £250, which is a 20 per cent assumed rate of return, but a capital ceiling at £12,000, at which point one is no longer entitled to MIG. When pressing me on this matter, Members of the Committee should remember that we are treating savings five times more generously in imputed rates of return than under the current MIG system.
	I now move to Amendment No. 91. The noble Lord's amendment suggests that the assumed rate of return on capital should be set with reference to the yield on long-term UK government bonds. This is not my field. Long-term bonds are traded every day and hence their value alters daily. However, the yield on those bonds is approximately 5 per cent. For example, I am told that the yield on a 15-year bond was 4.76 per cent on 16th January of this year.
	Thus the implication of this amendment would be to halve the assumed rate of interest on capital. Applying such a low return to capital, as the amendment would suggest, would distort incentives to save away from pensions into other forms of capital. I keep rehearsing the arguments about distorting the financial products market.
	The Bill, as drafted, maintains the balance in the personal finance market and a level playing field. The proposed amendment would upset that balance. It would cost an extra £300 million. That cost assumes that the noble Lord would wish to see us retain the £6,000 capital disregard, with £10,000 for those in residential care and nursing homes, in order to avoid placing increased intrusion on the vast majority of those entitled to pension credit with small amounts of capital.
	Quite apart from the substantial extra cost going to the better off, it would be impracticable to link this huge rate of return on capital to a price that changes every day. That would require pensioners to report capital levels more regularly and would pose a new administrative burden on the Pension Service. With those explanations, I hope that the noble Lord will feel able to withdraw the amendment.

Baroness Noakes: I thank the noble Baroness. Perhaps I may take her back to the example I went through earlier. It referred to a pensioner who had £25,000 of capital which was producing 5 per cent. If it is a safe investment, that is probably what it would yield. There is nothing fancy about that. There is no income depression involved or special income bias. It is pretty straight.
	On that basis, the pensioner would be deemed to have income which he does not have, so he would be deemed to deserve a savings credit of a much lower amount than one based on his actual income. What I cannot quite understand from the noble Baroness is why she is content with a formula which may seem fair and generous for some pensioners with particularly small amounts of capital but which is grossly unfair to those whose capital begins to rise above £12,000. I cannot see how the noble Baroness can sustain that position.

Baroness Hollis of Heigham: I do not want to be polemical, but I believe that is a bit rich coming from an Opposition who, when in power, introduced the income support system, which assumed a return of 20 per cent on capital. We are not inventing the social security system from scratch. We have turned an existing savings rule, which was both capped and seriously heavy in terms of its implication for deemed income, into something which is not capped and which for about 95 per cent of pensioners reflects a rate of return which will be either less than or at the existing rate of return from any capital in a building society account or long-term bond. I believe that that is a remarkably generous move to make and far in advance of everything that we inherited.

Baroness Turner of Camden: I thank the Minister for that explanation, which I do not find entirely persuasive. I also share the view that it is unfair to deem people to have an income which they cannot have had. I do not entirely accept the difficulty for individuals who are perhaps slightly better off and who may have earned a reasonable income during work but who are faced in retirement with not such a marvellous pension return. It is not so difficult for such people to ascertain what their rate of interest has been and to make an appropriate return as to the actual amount of income received. I simply do not accept that that is terribly difficult.
	I also understand the Minister when she says that we are talking about slightly better off people. They are slightly better off, but they are not wealthy. One is not wealthy nowadays if one has capital over £12,000 in the bank; many people have managed to save that while working hard. I do not see that they must be regarded as people who are so well off that they do not need any particular attention.
	I will look carefully in Hansard at what the noble Baroness said. Perhaps we will come back to this on Report. I do not find the explanation all that persuasive. I am not concerned about what the previous government did; I am concerned about what it says in our legislation. I beg leave to withdraw.

Amendment, by leave, withdrawn.

Baroness Noakes: moved Amendment No. 89:
	Page 9, line 19, leave out subsections (2) and (3) and insert—
	"( ) Income shall be calculated in accordance with rules which apply for income tax purposes."

Baroness Noakes: The amendment covers several things that we have already covered. I shall not repeat the arguments. It covers the deletion of subsection (2), which we have just debated, and it covers the use of income tax rules, which we debated earlier. I shall not go over that ground again. However, the additional thing that this probing amendment would do is to delete subsection (3), which says that,
	"Income and capital shall be calculated or estimated in such a manner as may be prescribed".
	As the Minister knows, I favour the more natural definitions that are rooted in other parts of the financial system in this country, in particular the income tax system. However, given that we are not going down that route and that I am rapidly giving up hope of any form of Damascene conversion on the opposite Bench, I would like the Minister to say for what purposes she intends that subsection (3) would be used. For what reasons must income and capital be calculated or estimated in ways prescribed by the Secretary of State? I beg to move.

Baroness Hollis of Heigham: I would have thought that the discussion that we have just had would have covered the point raised by the noble Baroness. For example, we are talking about a capital sum of £6,000 for exemption. In the past, the noble Earl, Lord Russell, for example, tried to raise the floor and the ceiling of capital limits. I used to join him in that. It is not inconceivable that a future government may wish to revisit that issue. It is equally possible that a future government might wish to revisit the issue of a notional rate of return, as we have done with pension credit. The subsections give such powers, and obviously they will be subject to the usual parliamentary scrutiny.

Baroness Noakes: I thank the Minister for that. I had understood that the rate of return was being dealt with by subsection (2), which we have already debated, and not subsection (3). However, I take it that the example that she gave shows that subsection (3) covers the capital floor and ceiling. We will consider the matter further in the context of other aspects of the clause. I beg leave to withdraw.

Amendment, by leave, withdrawn.
	[Amendments Nos. 90 to 92 not moved.]

Baroness Noakes: moved Amendment No. 93:
	Page 9, line 23, leave out subsection (4).

Baroness Noakes: Having moved Amendment No. 93, I shall also speak to Amendment No. 94. They are also probing amendments.
	Amendment No. 93 would delete subsection (4), which says that income,
	"in respect of any period shall be calculated in accordance with prescribed rules".
	Amendment No. 94 would delete subsection (5), which says:
	"The rules may provide for the calculation to be made by reference to an average over a period (which—
	remarkably—
	"need not consist of or include the whole or any part of the period concerned)".
	So it can be some other period.
	I have already said once or twice that some of the ways in which the clause is constructed represent a kind of fantasy world that the department occupies with regard to income and capital. The subsections allow the department to average out income. The Explanatory Notes refer to averaging out earnings, but the powers would doubtless be used for other purposes as well. I am not sure that pensioners, who might understand averaging of income, would understand averaging by reference to periods other than that being referred to.
	I shall not press further my main themes of using natural definitions of income and capital, but I should be grateful if the Minister could explain why these powers are needed. I beg to move.

Lord Hodgson of Astley Abbotts: I wish to support the amendment moved by my noble friend. Given that this is primary legislation, the provisions are extraordinarily widely and loosely drawn. As my noble friend Lord Higgins has pointed out, we do not yet have the benefit of regulations which might help in our thinking.
	What gives cause for the greatest concern is the fact that there is no way of controlling any future government in respect of these important aspects of the Bill, except through regulations. I think that some form of statement included in the primary legislation would be helpful. So far we have not been able to tease out of the Government enough of their strategic thinking to give us confidence that sufficient pegs have been hammered into the ground within the primary legislation.

Earl Russell: My concerns are very similar to those of the noble Lord, Lord Hodgson of Astley Abbotts. I think that I am somewhat allergic to overprescription, a phenomenon not by any means confined to the medical profession. But in this instance I am not concerned about the policy intentions of the present Government. I am more concerned with the capacity of vires to act like minefields. They lie about and then explode under your feet many years later, when you have no idea that they are there.
	In particular I am interested in the wording of subsection (4):
	"A person's income in respect of any period shall be calculated in accordance with prescribed rules".
	Is there anywhere else in this Bill or in any other social security law a limitation on what some future government might prescribe under that subsection? Alternatively, is it a completely open-ended power, a pure Cambyses clause that allows the Secretary of State to do whatever he likes? That point is, I think, of some importance.

Baroness Hollis of Heigham: It would be important if it were true in that form. It is not, because any such exercise of power is embedded in a regulation which will have to come before the House either through affirmative or negative procedures. I would remind the noble Earl, Lord Russell, of what I am sure he already knows: the Delegated Powers and Regulatory Reform Committee thought that our use of regulation-making powers in the Bill was entirely satisfactory—I hope I have not put words into the mouth of the committee. It put forward no suggestions and proposed no alterations to that effect. We have been given a clean bill of health in that respect.
	On many occasions the noble Earl has teased both myself and previous Ministers standing at this Box when we have had what are called the "Humpty Dumpty" clauses, in which income may be treated as capital and capital may be treated as income. When one scratches at the surface, one finds a perfectly good reason for it: it is done in order to avoid avoidance, if I may put it in those terms.
	It is only sensible that a person's income in respect of any period shall be calculated in accordance with prescribed rules. The alternative would be to calculate it in accordance with no rules, which I am sure would be unwise.
	By removing subsection (4), Amendment No. 93 seeks to remove the capacity of the Secretary of State to prescribe rules, within regulations and subject to parliamentary scrutiny, for how income should be calculated in respect of any period. Pension credit entitlement—the emphasis should be put on "any period" in respect of this—will be calculated on a weekly basis. The guarantee credit will be calculated by comparing the appropriate minimum guarantee with the pensioner's income. Where the appropriate minimum guarantee exceeds the income, pension credit will make up the difference.
	The savings credit will be calculated by using certain percentages of the rewardable income, again on a weekly basis. Therefore, to achieve the pension credit calculation it will be necessary to ensure that both the pension credit and the income are expressed in weekly terms. Regulations will ensure that this will be the case. For example—it is always helpful to give examples—it will allow a calendar monthly or a quarterly payment of an occupational pension to be converted to a weekly equivalent.
	A further use of the subsection will be to allow the decision maker to attribute income. This would mean that income would be taken into account over the same period for which it was paid. An example would be where the weekly state retirement pension is paid at four-weekly intervals. Without the facility to attribute the payment over four weeks, the decision maker would need to take the whole of the amount into account when it was paid—that is, for one week—but take nothing into account for the remaining three weeks. That would create a situation where the pensioner was not entitled to pension credit for the week of payment but was entitled for the other three weeks. That would obviously be an unacceptable situation for pensioners and administrators.
	Like the noble Earl, Lord Russell, we are all concerned about our reliance on delegated legislation. I reassure the Committee that the secondary powers to be introduced under subsection (4) would be used only to ensure that a correct amount of pension credit entitlement may be calculated. Therefore I urge the noble Baroness to withdraw the amendment.
	Amendment No. 94 seeks to remove subsection (5), which contains the power to prescribe rules, within regulations, to be used to average income over a period. This power already exists within the minimum income guarantee provisions and it will be used in exactly the same manner in the pension credit calculation of entitlement—that is, it will allow the decision maker, where an income is irregular or erratic, to calculate an average, using a reasonable period for that calculation.
	If the amount of income fluctuates, we want to be able to use an average figure. The fluctuation may follow a regular pattern—for example, the younger partner of a pensioner getting pension credit who is weekly paid may normally work one day a week, but on one week in four may work two days or none. In such a case, we intend that the average is taken over one cycle of that pattern.
	If there is no pattern, we intend to base the average on the last two payments, if paid monthly or at longer intervals, or the last four if paid at shorter intervals, unless that would give an unrepresentative result—for example, if it included a wholly abnormal payment such as a Christmas bonus and so on. In that case we intend to provide for the flexibility to be able to use a different period which would give a more accurate, representative result.
	This is a fully tried and tested method of calculating income throughout social security. It will work to the pensioner's advantage because it will provide an accurate calculation of his/her weekly income. With those explanations—as I said, it is perhaps the averaging of the period that we should be concentrating on in this subsection of the clause—I hope the noble Baroness will be content to withdraw the amendments.

Baroness Noakes: I thank the Minister for that comprehensive reply. Those of us who have spoken to the amendments have expressed disquiet about the powers in the Bill and the way in which they may possibly be used. We shall reflect further on what the Minister has said. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 94 and 95 not moved.]

Baroness Noakes: moved Amendment No. 96:
	Page 9, line 29, leave out paragraph (a).

Baroness Noakes: In moving Amendment No. 96, I shall speak also to Amendment No. 97, which partially overlaps with Amendment No. 98 standing in the names of the noble Baronesses, Lady Castle and Lady Turner.
	We are now reaching the end of Clause 15. I believe I hear sighs of relief coming from the Front Bench opposite. Amendment No. 96 seeks to remove paragraph (a) from subsection (6). Paragraph (a) states that,
	"a person is treated as possessing capital or income which he does not possess".
	The Explanatory Notes refer to repeating other provisions which deem a notional income from capital disposed of solely or mainly to increase extra pension credit. As most members of the Committee will know, I am a newcomer to social security matters, but I do have some background in taxation. I am very clear that if the tax system tried to incorporate this kind of anti-avoidance provision, there would have to be extraordinarily clear rules on the face of a Bill. It would not be allowed to relegate this to prescription after the event with relatively little scrutiny.
	It allows the department to rewrite history, to turn it into something that fits its concept of how pension credit should work. If a pensioner gifts his capital, thus depriving himself of income, will the Minister say in what circumstances the department will seek to deem something else? What will happen if a pensioner takes the disincentive effect of the savings credit, and he blows all his capital on a holiday or a fast car? What are the principles involved in using these interventionist powers?
	Amendment No. 97 would leave out two further paragraphs in Clause 15(6). Paragraph (c) allows income to be treated as capital and paragraph (d) allows capital to be treated as income. These powers are in the same category as those to which I have just referred. The Explanatory Notes give no idea as to why they are needed. Is their purpose to try to normalise the investment policies of pensioners, to deem them as having capital or receiving income had they conducted their affairs differently? If so, what personal freedoms are pensioners being allowed to have?
	I hope that the Minister will tell us what she has in mind for these powers. I beg to move.

Baroness Turner of Camden: I have an amendment in this group—Amendment No. 98—which seeks to leave out paragraph (c) from Clause 15(6), providing for income to be treated as capital in prescribed circumstances. The power already exists under the income support regulations. Income treated in that way includes tax refunds and occasional charitable payments. It would be logical to include such payments in the types of income to be disregarded. If not spent, they would automatically become part of the recipient's capital in the same way as any other income that is not spent. I await the Minister's response with interest.

Baroness Hollis of Heigham: It is right that we should explore this important issue. The three amendments have been grouped together because they all relate to Clause 15(6). The first of them—Amendment No. 96—seeks to remove subsection (6)(a) which includes important powers for anti-abuse provisions designed to prevent claimants who have deliberately deprived themselves of income and capital from securing or maximising their pension credit entitlement. Under the proposed amendment, the subsection would be removed, and with it the necessary safeguard.
	We intend to retain the broad framework for guarding against intentional deprivation of capital or income that exists in the minimum income guarantee. That has been built into social security arrangements for a long time. It is not acceptable for people deliberately to reduce their income levels to maximise their pension credit entitlement. We propose to adapt the rules and guidance to ensure that while protecting the integrity of the pension credit scheme we uphold our commitment to reducing intrusion into people's lives.
	In practice, the regulations will have to ensure that pensioners, especially when an assessed income period is in place, will not feel that they are limited in how they choose to spend their savings. They may want to pay off a mortgage or repay previously incurred debts. That would be reasonable financial planning in which one could engage before retirement. Other examples could be installing a new kitchen, going on holiday or buying a new car. None of those examples would be regarded as intentional deprivation of capital.
	The rules governing how we consider deprivation and how we apply notional income or income from notional capital will focus primarily on gifts or similar disposal, other than between the couple, such as having one's pension paid to a third party.
	Equally, when a pensioner goes into residential care or a nursing home, the value of the home, which we have previously ignored for the purposes of pension credit, becomes a capital asset. It is understandable that pensioners want to pass the value of their home to dependants. It is not uncommon for them to do so just as their health deteriorates and a stay in residential care seems likely. In such cases, however, a pensioner would be judged as having deprived him or herself of the value of the home, which would be taken into account in calculating their pension credit, as it would under minimum income guarantee provisions, and as it does in terms of charging assessments for local authority homes now.
	I can assure the Committee that these are real issues and that they are at the forefront of our minds as we develop regulations. We want to get the balance right. We do not want to intrude into people's lives but we want to avoid the intentional deprivation of capital in order to maximise pension credit.
	Amendment No. 96 suggests that we remove this legal provision from the Bill. But in doing so we would see the pension credit system laid open to the most blatant abuses. Pensioners could deprive themselves of income and capital. Even if we had clear evidence of a pensioner's intention to deprive himself of income or capital in order to gain pension credit, we would be powerless to take that income into account. That would not be fair on other taxpayers.
	In Amendment No. 97 the noble Lord, Lord Higgins, seeks to remove subsection (6)(c), which contains the power to prescribe rules, within regulations, dealing with the circumstances in which income is to be treated as capital or capital is to be treated as income—what the noble Earl, Lord Russell, has referred to as the "Humpty-Dumpty clauses". Paragraph (c) contains the power (already contained in the minimum income guarantee) to prescribe in regulations the circumstances in which the one is to be treated as the other. It would be used in circumstances when a payment that is regularly received, or is made in relation to a particular period, should not be treated as income; for example, a pensioner may have loaned a relative some money which he or she is repaying monthly by instalments. Although it would be regular monthly income, it clearly would be in respect of capital and, therefore, we would want it to be treated as such.
	Paragraph (d) represents the reverse. It is intended that the regulations made under this power will provide for the treatment as income of a payment that has the nature of an income, although it could, as a result of general law, be regarded as a capital holding—for example, it is paid regularly or in relation to a period, such as regular payments from an annuity. I should like to reassure the Committee that secondary powers to be introduced under paragraphs (c) and (d) would be used only so that a correct amount of pension credit entitlement may be calculated. I hope, therefore, that noble Lords will feel able to withdraw those amendments when we reach that stage.
	Finally, I turn to Amendment No. 98, which in part is the same as Amendment No. 97. It seeks also to amend subsection (6). However, it would remove paragraph (c) only of that subsection. As I explained when dealing with the previous amendment, this subsection contains the power to prescribe, within regulations, the circumstances in which income is to be treated as capital—such as in the case of a repayment of a loan. There would seem to be little value in this subsection, but it is there for specific purposes that include benefiting the pensioner. Paragraph (c) will be used in those circumstances when a repayment received regularly, or made in relation to a particular period, should not be treated as income. That applies to a loan repayment from a relative, as I explained earlier.
	If it were treated as income, depending on the rate of repayment and the pensioner's weekly pension credit entitlement, pension credit entitlement would be reduced or even extinguished. For example, a pensioner may be entitled to £15 week to bring his income up to the appropriate minimum guarantee. If the loan repayment instalments were £10 a week, the pension credit would be reduced to £5 a week. If the instalments were £50, entitlement would be extinguished. If the repayment of the loan were made in one lump sum, entitlement would be extinguished for just that one week. Thus the pensioner would need to reclaim pension credit for the following week. He or she may also need to reclaim housing benefit and council tax benefit. These situations would not, I think, be acceptable for any of us.
	However, if the payments were to be treated as capital, as is the Government's intention, there would be no effect on pension credit if the capital holding were equal to or below £6,000 or if an assessed income period had been set. If total capital were above £6,000 or an assessed income period had not been set, the £1 in £500 assumed income from capital provisions would apply. Given all those examples, I hope that the Committee will agree that these provisions are benevolent; that they will ensure accuracy; and that they are indeed necessary to ensure that the Bill's proposals are treated properly.

Earl Russell: The Minister has given us a very persuasive account of what will be done under the "Humpty-Dumpty clause", as I thought she would. That is why I did not ask her to do so. However, I trust that the noble Baroness will accept that there are two equally valid questions here. First, under the present Government, what will be done under this clause? Secondly, under the powers that we are creating and leaving behind in statute, what could be done under this provision? I hope that the Minister will accept that both those questions deserve answers.

Lord Hodgson of Astley Abbotts: I join the noble Earl in expressing that view. What may happen in the future must be a matter of concern for us all. The Minister gave a series of examples of what was good and what was bad. All that is perfectly understandable, but with the passage of time matters may be viewed differently. Reading Clause 15(6) is like reading Alice in Wonderland. Under its provisions, income can be capital, capital can be income, and people can be deemed as having capital that they do not possess. I understand the purpose behind the subsection, but someone reading it through simply could not understand it.

Baroness Hollis of Heigham: Come on! That is daft, if I may say so politely. These are well-established principles in social security legislation by which one allows income to be treated as capital. Almost every social security Bill that I have been involved with over the past 10 or 15 years has included such provisions in regard to income-related benefits. The alternative for pensioners would be much worse. If they were financially unsophisticated and made a loan, for example, which was capital and which was then repaid in instalments as weekly income, they could lose their own income in return. We are protecting them from that contingency. What we are seeking is the intent behind it. If the intent is deprivation, then that will count for our purposes. If the intent is not deprivation, we shall obviously take that into account in terms of expenditure patterns. If the flow of money comes in as though it were income when it is actually a form of capital in stages, it is in the pensioner's interest to treat that as capital, and vice versa.
	There is a broader point about what governments may do 50 years from now. That is one of the reasons why we have a Parliament and why regulations are scrutinised by Parliament. If any subsequent administration, of whichever persuasion, seeks to use these provisions to abuse the purposes of this legislation and are less than benevolent in their intent to pensioners, it is for the Members of this House to be on their guard in terms of scrutiny. I cannot help it if, 20 years down the road, people fall asleep when the word "regulations" is mentioned. It is up to Parliament to stay awake.

Baroness Noakes: A few moments ago the Minister asked us to agree that these provisions are benevolent. I think I can say that neither I nor other Members of the Committee agree with her.
	My noble friend Lord Hodgson referred to the provision as like something out of Alice in Wonderland. I agree. One of the points that troubled me was the Minister's reference to the repayment of loans being treated as income. That really is an Alice in Wonderland idea. Earlier, I talked a great deal about income tax. Under such concepts, never in a million years would a home loan be seen as income. But there are other branches of the law—for example, trust law—where there is no way in which the repayment of loan would be income. I am beginning to worry about what kind of wonderland the Department for Work and Pensions exists in. Like other noble Lords, I want to reflect further on the Minister's remarks. We may want to return to the matter on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 97 and 98 not moved.]
	Clause 15 agreed to.
	Clause 16 [Retirement pension income]:
	[Amendments Nos. 99 and 100 not moved.]
	Clause 16 agreed to.
	Clause 17 [Other interpretation provisions]:
	[Amendment No. 101 not moved.]
	Clause 17 agreed to.
	Clause 18 [Equal treatment for widows and widowers]:
	On Question, Whether Clause 18 shall stand part of the Bill?

Baroness Noakes: I shall try to be brief. I rise to speak partly because the clause has nothing to do with pension credit, but the Government have used the opportunity of the Bill to change the law as it relates to widowers' pensions. The clause heading says that it is about equal treatment for widows and widowers, but on another analysis the clause takes away entitlements that already exist in law for widowers.
	I know that the Minister will say that the clause is necessary because a mistake was made that has resulted in overpayments to some men by comparison with women in the same position, but when the clause is made law it will result in men being paid less than they are currently paid. Will the Minister explain how the error arose? Legislative errors are much more likely when legislation is complex. How long did it take the department to spot the error? What is the department doing to ensure that some errors cannot happen again?
	I am sure that the department is not pursuing simplicity as a strategy to counter legislative error. The Bill is proof of that. I should be interested to know what other strategies the department is pursuing.
	How many individuals are affected by the clause and how much has been paid to them in aggregate because of the error? As the amounts involved could be significant to the individuals concerned, will the Minister tell us what the department will do to relieve hardship when the amounts paid are reduced if, for example, individuals have taken on financial commitments on the basis of a level of income that the department does not intend them to have in future?

Baroness Hollis of Heigham: The clause makes a technical amendment to the Pension Schemes Act 1993. It is necessary to ensure that men and women in the same circumstances who are entitled to bereavement benefits are treated equally. It is consequential to the introduction of bereavement benefits in the Welfare Reform and Pensions Act 1999. Those benefits came into effect from 9th April 2001. I regret that it was overlooked at the time.
	The clause ensures that a widower who receives a widower's pension from his wife's contracted-out private pension scheme does not also receive a benefit from the state as if his wife had not been contracted out. That is the element of double provision. Someone who contracts out of SERPS builds up rights in an occupational or personal pension in place of the benefits that they would have received under SERPS. In return, either they pay a reduced rate of national insurance contributions or they receive a rebate of contributions paid.
	Before April 1997, when the links between SERPS and private pensions were broken, those rights were known as the guaranteed minimum pension if they were in a contracted-out salary-related scheme, or protected rights if they were in a money purchase scheme. When someone who had been contracted out between 1978 and 1997 reaches state pension age, the amount of their notional SERPS for that period is reduced to take account of that part of their private pension that has been funded by the rebate. That is known as the contracted-out deduction and is to prevent double provision.
	A similar reduction is made from the amount of SERPS that a widow inherits from her husband if he had been in a contracted-out pension scheme. That is to take account of the widow's pension that she receives from her husband's private pension scheme.
	Before the introduction of bereavement benefits in April 2001, widowers could inherit SERPS from their wives only if they were both over state pension age when the wife died. Therefore, Section 47 of the Pension Schemes Act 1993 provided for a contracted-out deduction to be applied only in those cases.
	With the introduction of bereavement benefits, widowers can now inherit SERPS from their wives if they are entitled to widowed parent's allowance or when they become entitled to retirement pension if they were previously entitled to widowed parent's allowance or bereavement allowance.
	However—and this was the mistake—there is no power to apply a contracted-out deduction if the wife was in contracted-out employment. That is because no amendment was made to Section 47 of the Pension Schemes Act 1993 when bereavement benefits were introduced by the Welfare Reform and Pensions Act 1999.
	Consequently, some widowers are currently receiving double provision—they are getting both SERPS and a widower's pension from their wife's contracted-out private pension scheme. That is clearly against the policy intention.
	We estimate that, in the first year, from 9th April 2001, about 13,000 widowers will qualify for widowed parent's allowance. The figure includes men previously widowed who were receiving child benefit when the new bereavement benefits were introduced. We estimate that, of those, 3,000 to 4,000 men have received extra benefit because their wives were members of contracted-out pension schemes at some time between 6th April 1988 and 5th April 1997. The average amount of additional benefit that those widowers will receive is about £10 per week, although some amounts will be very small. The total annual cost would be about £2 million.
	That double payment—which is what it is—was clearly against the policy intention. As the noble Baroness, Lady Noakes, absolutely rightly said, a mistake was made. As your Lordships will remember, when we introduced the new bereavement benefit, we sought to provide equal access to benefit following widowhood to both men and women. We certainly did not intend to privilege men over women in that respect, as they currently are.
	As I said, we estimate that 3,000 to 4,000 widowers a year are affected. We have identified them and are writing to them when their claim to widowed parent's allowance or retirement pension is processed. We are explaining that, due to this mistake in the legislation, they will be temporarily receiving a higher amount of benefit than was intended. We are telling them how much the extra is, that we intend—subject to parliamentary consent—to change the legislation for the future, and assuring them that they will not have to repay any extra benefit they receive in the meantime.
	The clause returns to the original policy intention and ensures that men and women entitled to bereavement benefits are treated equally. I hope that your Lordships agree that Clause 18 should stand part.

Clause 18 agreed to.
	Clause 19 [Regulation and orders]:

Lord Higgins: moved Amendment No. 102:
	Page 13, line 30, at end insert—
	"(e) section 9(5),
	(f) section 15,
	(g) section 16, or
	(h) section 17(2)"

Lord Higgins: I shall be very brief as time is moving on. I certainly do not propose going through all the details of the specific items that we are suggesting should be added to the list of regulations that are subject to the affirmative resolution procedure rather than the negative resolution procedure. The only reason I rise to speak to the amendment is to tell the Minister that, if it is at all possible, it would be helpful to have drafts of the regulations before Report stage. Although many orders are important, we believe that these particular ones should be subject to rather more detailed scrutiny. Furthermore, if she is going to circulate such drafts or further explanations, would she circulate them to the usual suspects who have been participating in our debates?

Baroness Hollis of Heigham: The noble Lord, Lord Higgins, has used the amendment to press his point on the regulations. I shall seek to be helpful, but I cannot go beyond that assurance. I have a copy of the Delegated Powers and Regulatory Reform Select Committee report, which states,
	"the bill contains a large number of delegated powers which are explained in the Department's excellent memorandum (printed at Annex 1)"—
	which I am sure will be tonight's bedside reading for the noble Lord, Lord Higgins.
	The Select Committee did not consider the particular powers in detail, apart from one, but said that,
	"there is nothing in this bill which needs to be drawn to the attention of the House".
	Given the standing of the Delegated Powers and Regulatory Reform Select Committee, I am mindful of its suggestions to the House. I have circulated to the noble Lord, Lord Higgins, and to the noble Baroness, Lady Barker, a memorandum, in addition to the one that went to the Select Committee, on how we seek to use the powers. If the noble Lord, Lord Higgins, wishes to write to me between now and Report and Third Reading, I shall try to be helpful and deal with any detailed examples that he is worried about. I shall do my best to respond to any such point.

Lord Higgins: The Committee will be grateful to the noble Baroness for the usual helpful way in which she has sought to facilitate our discussions. I therefore beg leave to withdraw the amendment. Amendment, by leave, withdrawn.

Clause 19 agreed to.

Lord Higgins: moved Amendment No. 103:
	After Clause 19, insert the following new clause—
	"ANNUAL REPORT
	The Secretary of State shall lay an annual report before Parliament on the performance of the pensions service that shall include—
	(a) an estimate of the take-up of the state pension credit;
	(b) the cost to the department including details of staff and telephone costs; and
	(c) the percentage of pensioners paid less than the maximum state pension credit because of their deficient national insurance contribution records."

Lord Higgins: Amendment No. 103 stands in my name and that of my noble friend Lady Noakes. It seeks to insert a new clause calling for an annual report to be laid before Parliament. This is an important amendment. I refer to the various issues we have raised during the course of debate. It is appropriate that an annual report should be laid before Parliament which includes, first, an estimate of the take-up of the state pension credit. Previously, I have referred to that matter. We are concerned about take-up, as, indeed, are the Government. On previous amendments we discussed the likely extent of take-up, or, rather, the likely extent of the failure to take up the state pension credit on the part of its intended beneficiaries. That being so, we must obviously keep tabs on what is happening under the provisions of the Bill. Therefore, we think that it is right to include the provision.
	Secondly, we suggest that the cost of the provision to the department, including details of staff and telephone costs, ought to be included in the annual report. As we mentioned earlier, a department should take suitable measures to ensure that as many people as possible are aware of the provision and whether they are entitled to it. However, one also needs to have some idea of what the cost of the provision is likely to be and whether it is too high or too low. One should also take account of the actual cost of the state pension credit itself as that is closely correlated with the extent to which it is taken up.
	Thirdly, the amendment refers to those pensioners who are paid less than the maximum rate of pension because of their deficient national insurance contribution records. Provided that we do not manage to make provision for them at later stages of the Bill, we should have some idea of how many are involved and to what extent they suffer if they are not treated fairly. However, that is a matter to which we shall return at later stages. We shall have to consider to what extent the provisions of the Bill as they now stand are or are not fair. This is an important amendment. My noble friend Lord Hodgson of Astley Abbotts has an amendment grouped with this which I shall leave him to address. We hope that the Government can accept this proposal which is extremely sensible and is not unprecedented. I beg to move.

Lord Hodgson of Astley Abbotts: Amendment No. 104 in my name is grouped with Amendment No. 103. I should like to begin by making clear that I strongly support the amendment in the name of my noble friend Lord Higgins. It is clearly important with such a complex Bill that Parliament should hear about its operation on a year by year basis. The annual report is clearly a good way of doing that.
	However, I should like to go further. The annual report mentioned in the amendment proposed by my noble friend is essentially a bird's eye view. I am concerned about the operation of the proposal from the point of view of those who will receive the pension credit. I am looking, so to speak, from a worm's eye view. Service level indicators are, of course, increasingly prevalent as a measure of corporate performance. I believe that they could usefully be brought into play here. The kinds of areas that I have in mind are, for example, standards set for telephone answering. Earlier the noble Baroness, Lady Barker, mentioned the use to which the telephone is likely to be put in the implementation of the new proposal. We all know that that kind of operation can lead to endless requests to "Press five, press three, press six, press seven", followed by, "I am afraid that all our lines are busy. Please call again later". That kind of response will infuriate people who seek to take advantage of the pension credit or are entitled to it. A service level indicator for that kind of thing would be a good way to make sure that the scheme is properly implemented.
	Clearly, implementation will be absolutely critical. There could be similar SLIs for response times to correspondence and response times to reviews and appeals. No doubt, other Members of the Committee and the Minister will have their own views as regards what constitute the critical aspects of service level performance. Clearly, to be effective SLIs need to be published in advance and a report needs to be produced later showing how the department managed—or did not manage—to achieve the levels set for it in the following year. That is a useful way of adding to the annual report. Those who will receive a pension credit will find comfort in that, in that they will be able to see how the scheme operates. I hope that the Minister will look with favour on the amendments.

Lord Fowler: I strongly support these very important amendments. Until this point in Committee we have necessarily been dealing with a great deal of detail. The amendments are more general but they are also entirely basic. They would require monitoring of what takes place once the Bill has been enacted. All the commentators talk about pre-legislative scrutiny. I in no way decry that; it is obviously very important. However, the big gap in our defences involves post-legislative scrutiny—scrutiny of the way in which legislation works in practice.
	In the pensions area, the intentions of legislation and of its authors can be defeated by the way in which legislation is implemented. Mistakes can go on for years. There was an example of that only last week. The widows of thousands of former soldiers were deprived of many millions of pounds in pensions, in some cases for as long as 50 years, because of a blunder by the Ministry of Defence. The Income and Corporation Taxes Act 1952 made pensions tax free if they were,
	"granted on account of medical unfitness attributable to or aggravated by naval, military or air force service".
	The Royal Navy and the RAF followed that ruling and did not deduct tax, but civil servants administering Army pensions failed to take account of the legislation and continued to tax. As I said, that went on for about half a century. Had it not been for the efforts of one man, it would doubtless still be going on now.
	We could also consider a case that I know only too well—that involving widows and the state earnings-related pension scheme. The intention of the legislation was absolutely clear. It was to bring widows' entitlements entirely into line with occupational schemes. The legislation was introduced by myself in a Statement in the other place. We debated the legislation on Second Reading and in Committee, and I even published a separate leaflet on the subject. My Minister of State, who went on to become Prime Minister—John Major—promised a publicity campaign. However, we moved on after the 1987 general election. There was no publicity campaign and one leaflet continued to give the wrong advice for years afterwards. Ministers took responsibility but in fact the leaflet never went near Ministers, as the Permanent Secretary said in her evidence. It did, however, go through the hands of more than 100 civil servants. Had there been a checking process—this is my point—it is inconceivable that such a mistake would have taken place or lasted for so long.
	My point is that we must improve our monitoring process. Personally, I should very much like to monitor the impact of the Government's £5 billion a year pensions tax, which they have imposed and which I believe is having a dire impact on pensioners of the future. However, that is probably beyond the scope of this Bill.
	However, our ability to monitor the effectiveness of the legislation is not beyond the scope of the Bill. As I made clear at Second Reading, I support the Bill and giving the extra entitlement to many thousands of people, who often, through absolutely no fault of their own, have not had the opportunity to build up an adequate pension. That is why I support the principle and practice of what is being done. But it is in everyone's interest that the Bill works as it is intended to do, that the credit is efficiently administered, as my noble friend Lord Hodgson has just said, and that it reaches the people whom it is intended to reach.
	I believe that the type of provisions set out in these two amendments should be an essential part of all our legislation. I consider the post-legislative scrutiny in this country to be woefully inadequate. I believe that this Bill can put that right, at least so far as concerns pension credit. I suppose that it is too late for the House to divide. I am a new boy in that respect but I suspect that that would be highly unpopular on the other side. However, I hope that we can return to the matter on Report. I believe that there is a consensus on all sides that this is an area that needs to be tackled urgently, and there is absolutely no reason why we cannot tackle it now in this legislation.

Baroness Barker: The hour is late and I shall not delay the House for very long. I wish simply to add to the arguments that have already been deployed. Throughout the Bill there has been a great deal of discussion about the assumptions on which the pension credit is based. There have been a great many misgivings about some of those assumptions. But in what I hope the Minister will accept has been a very constructive debate, there has been a large degree of consensus that we should seek to take the Minister and her department at their word.
	Members of the Committee who have already spoken are absolutely right. In many respects this is a theoretical construct. I return to a point that I made at Second Reading: one of the tests of this measure will be the extent to which it fits in with the lives of older people. On that I believe that a great deal has yet to be proved. A measure of this kind, which will take so many pensioners within its scope, has within it a great deal of potential to go wrong. It may not; I hope that it does not.
	However, I believe that not only will the proposals be informative for the purposes of this and future social security legislation but they will perhaps have a profound effect upon tax legislation, other benefits legislation and, in particular, legislation which comes increasingly from the Department of Health. Given that so much decentralisation is taking place in that department, its legislation is extraordinarily difficult to fathom. For all those reasons, which go beyond the scope of the Bill, I believe that the measures are important. I hope that the noble Baroness will accept them.

Baroness Hollis of Heigham: I was fascinated to listen to the point made by the noble Lord, Lord Fowler, about pre and post-legislative scrutiny. In terms of, on the one hand, the use of pilots so that one has a learning loop before one extends possible policy nation-wide and, on the other, the amount of what I call "tracker research", in which we try to check the implications of our policy for the individuals concerned and thus again to have a learning loop, and in terms of all the legislation in which we have been involved since 1997, I should have thought that a person like the noble Lord who had followed the developments of social security over the past few years would recognise that we have tried very hard to build that in where appropriate. It is absolutely right that not only should there be pre-legislative scrutiny; there should also be post-legislative scrutiny. I hope that the noble Lord will accept that we have a fairly honourable record in that respect and in many ways have broken new ground.
	I turn to the amendments. Amendment No. 103 would require an annual report on the performance of the Pension Service to be laid before Parliament. Amendment No. 104 would require an annual report on the planned service levels and past performance of the Pension Service to be laid before Parliament.
	The amendments would ensure accountability and transparency for the service that we provide to our pensioner customers and clients. I wholeheartedly support that objective. I believe it is inconceivable that we would not report publicly on all aspects of the Pension Service in exactly the same way as we do in relation to the Child Support Agency, and so on. But this reporting should not be limited to the areas listed in the amendment. These areas are indicative and I am sure are not meant to be exhaustive.
	I can assure the Committee that the arrangements we have in place for reporting on the performance of the Department for Work and Pensions should provide Parliament with a comprehensive assessment of the performance of the Pension Service. The precise nature is still being developed, but we shall have arrangements in place which clearly detail the performance of the Pension Service each year and which are robust enough to more than meet parliamentary reporting standards.
	A range of service and performance targets and indicators are well established within the Benefits Agency, the unit with operational responsibility for delivering services to pensioners at present. They include how many times a telephone rings before one answers. My complaint on performance indicators is that if one is not careful, one ends up assessing the things one can count and not the things one cannot count, which are qualitative. We then sometimes think that the quantitative is more important than the qualitative. There are issues about how we turn customer service into things which can be assessed and not just mechanically assessed; for example, how quickly one answers the telephone. None the less, we are currently developing proposals for performance indicators that will apply to the Pension Service. They will be reflected in the final route for reporting on performance of service.
	It may be helpful if I remind the Committee of the reporting requirements that apply to the Department for Work and Pensions as a whole. The department will continue to present its annual departmental report to Parliament. That provides a comprehensive picture of performance across the whole department. The departmental report provides an account of departmental performance against its public service agreement objectives. It also provides an account of how the department has expended money voted to it by Parliament. That covers the cost to the department of administration for each customer group, including pensioners.
	On the question of administration costs, the primary route for the majority of customers to apply for their pension credit entitlement will be via the telephone, building on the model that has become well established for minimum income guarantee. The costs for administering pension credit are expected to be broadly the same, or slightly less, than for the current telephone-based costs for assessing minimum income guarantee. That will be the result of streamlining the administration and simplifying the rules. However, until the pension credit design is finalised, that can be only an estimate.
	I turn to other specific items that are listed for inclusion in any annual reporting. I, too, think it important that we focus on securing maximum take-up of pension credit and we expect the number of successful claimants to build up over time. As I said earlier, we are putting in place arrangements to ensure that everyone who is entitled to pension credit knows in good time what they need to do to take up their entitlement.
	Estimates of take-up of income-related benefits are currently published annually. However, DSS Research Report No. 100, entitled, Overcoming Barriers: Older People and Income Support, provided evidence of significant under-reporting of capital by pensioners responding to the Family Resource Survey. They failed to mention it and made it even more difficult for the department confidently to estimate take-up among pensioners. In order to tackle that problem, we have commissioned large-scale research from the Office for National Statistics and the National Centre for Social Research, which will enable us to improve the accuracy of the information we use to estimate take-up in future. If noble Lords wish to know what that research will look at, I am happy to write to them or to put a note in the Library.
	Amendment No. 103 refers to the position of pensioners who have a reduced state pension because of their deficient national insurance contribution records. I think that the noble Lord and I simply disagree on how we respond to this. I think that those who have made a full contribution should have that reflected. For those who have a less than full contribution, any private money should be first set against that before they then move into the pension credit system.
	The Government are committed to the evaluation of pension credit. We shall ensure that we have completed necessary baseline studies before the introduction of pension credit and will put in place processes to monitor the effects of the policy over time. The Department for Work and Pensions already has in place much of the data we need to provide an accurate baseline. As I have mentioned, we have commissioned major new research to help us to understand more about the many pensioners who will become newly entitled to pension credit in 2003. The information provided by that research will help us to understand and overcome potential barriers to take-up and assist in the marketing of pension credit when it is launched.
	We are committed to maintaining effective arrangements for monitoring performance and reporting to Parliament. I can assure the Committee that the arrangements we have in place will deliver much more information than is required by the amendment. I therefore hope and believe that noble Lords will accept that the amendments we are considering are unnecessary. In the light of that I hope that the noble Lord will withdraw the amendment.

Lord Fowler: Before the noble Baroness sits down, perhaps I may say that I have listened to her and she has used a great many words. Can I ask her straight whether she is setting her mind and her face entirely against any idea of there being an annual report to this House as far as concerns pension credit?

Baroness Hollis of Heigham: No, Members of Committee, certainly not. I said that it is inconceivable that the pension agency will not be reporting annually. We need to explore whether it reports in a separate report or whether that report on the pension service is embodied in the annual report of the Department for Work and Pensions.
	Our position is that we are not only deeply committed to pension credit but proud—I repeat, proud—of what we are seeking to do through the Pension Service. That will produce, for the first time, a service tailored to the needs of pensioners. In advancing that it is inconceivable that we should not want to draw the Chamber and the wider public's attention to our objectives and the degree to which we are able to meet them, including our public service level agreements. The only question is whether we end up with a ring-fenced report on the Pension Service and therefore the pension credit, or whether it is incorporated in the departmental report. We can pursue that matter on another occasion if Members of the Committee want.
	The notion that we should not want to bring full information to Parliament, to the voluntary organisations and to pensioners about their entitlement and the degree to which we can encourage them to take up their entitlement and the level of service that we can now offer for the first time, is inconceivable.

Lord Higgins: Whether or not there should be a separate report is perhaps a matter to which we may return later. It depends to what extent the department's report may reasonably be regarded as a best seller. Subject to that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 104 not moved.]
	Clauses 20 to 22 agreed to.
	Schedule 1 [Administration]:
	[Amendments Nos. 105 and 106 not moved.]
	Schedule 1 agreed to.
	Schedule 2 [Minor and consequential amendments]:

Baroness Hollis of Heigham: moved Amendment No. 107:
	Page 23, leave out lines 13 to 22 and insert—
	"(4) Subsection (4A) below applies where a statement is made in the House of Commons by or on behalf of the Secretary of State which specifies—
	(a) in relation to any of the items referred to in subsection (1)(b)(i) to (iv) above, the amount of the alteration which he proposes to make by an order under section 150 or 152 above or by or under any other enactment, and
	(b) the date on which he proposes to bring the alteration into force ("the proposed commencing date").
	(4A) If, in a case where this subsection applies, an award of state pension credit is made in favour of a person before the proposed commencing date and after the date on which the statement is made, the award—
	(a) may provide for state pension credit to be paid as from the proposed commencing date at a rate determined by reference to the amounts of the items specified in subsection (1)(b)(i) to (iv) above which will be in force on that date, or
	(b) may be expressed in terms of the amounts of those items in force at the date of the award."

Baroness Hollis of Heigham: I should be in dire disgrace if I had said "not moved" to this amendment. I was hoping at least to have some modest acknowledgement from the noble Lord. Although he has put pressure on us for not producing regulations, he might at least compliment us on so far not having to bring forward a series of government amendments to amend their own legislation, which has sometimes been the fate of previous Bills.
	Paragraph 17 to Schedule 2 provides for the introduction of a new Section 159B to the Social Security Administration Act 1992. The purpose of this amendment is to change the wording of the new Section 159B to prevent a technical difficulty which might arise in the pension credit decision making process. Having identified this possible glitch, I feel that it is right to introduce a preventative amendment now.
	The introduction of new Section 159B to the Social Security Administration Act 1992 gives the Secretary of State the power to make routine adjustments to pension credit for uprating purposes. This includes the power to make advance decisions on entitlement to pension credit on the basis of uprated amounts after the uprating order has been made.
	However, the problem we have identified is that it would not allow decisions on entitlement using uprated amounts in the time period between the Secretary of State's announcement of the uprated amounts and the date the uprating order is actually made. In other words, the decision-maker can only anticipate the new rates once the order has been made.
	The Government's aim is to facilitate advance claims for pension credit and to invite invitations to claim it four months in advance of the person's date of retirement.
	It is feasible that such an invitation to claim is sent, and therefore that the claim for pension credit is made, during the time period I have just mentioned—between the Secretary of State making a statement in the House of Commons about the proposed uprated amounts of pension credit, and the date the uprating order is made.
	So, for example, the uprating statement would normally be made in November, but the uprating order would not normally be made until February. Therefore, people who reached retirement age in, say, April, would be invited to claim pension credit in December—four months prior to retirement age. But decision-makers would be prevented from adjudicating on their claims using the rates which would apply when the person reached retirement age in February.
	Such a problem has been encountered in the past, with claims to retirement pension. The result was that advance claims for retirement pension were stockpiled until the uprating order was made, thus incurring an increased administrative burden and cost. The Social Security Act 1998 introduced a new section—Section 155A—to the Social Security Administration Act 1992 to deal with that problem.
	This amendment, specifically new subsection (4A), introduces an equivalent provision for pension credit while maintaining the original powers in the current draft. It would allow decisions to be made on advance claims to pension credit based on uprated amounts where the claim related to a period starting after the uprated amounts became payable; and the Secretary of State had made a statement in the House of Commons about the proposed uprated amounts of pension credit; but the order which brought the uprated amounts into force had not yet been made.
	It is essentially a technical amendment, necessary to ensure that the claims process for pension credit can take place in a logical and legally sound manner. It is right that we take action now. I hope that the Committee will accept this technical amendment.

On Question, amendment agreed to.
	Schedule 2, as amended, agreed to.
	Remaining schedule agreed to.
	House resumed: Bill reported with an amendment.
	House adjourned at twenty-seven minutes past ten o'clock.